Exchange rate volatility, exchange rate regimes and trade flows: Evidence from the Norway-UK and Norway-US trade functions (1900-2000)

This thesis investigates the impact of exchange rate volatility and exchange rate regimes within a generalized gravity equation and an error correction model using aggregate Nor- wegian data for exports to the UK and US for the period 1900-2000. My findings suggest that exchange volatility and exchange rate regimes have had a negative but insignificant impact on exports from Norway to United States. On the other hand, I find that the im- pact of exchange rate volatility on exports to the United Kingdom is positive, both in the short and long run, however the latter appears to be more than four times greater than the short-run effect. Furthermore, the results suggest that an intermediate and floating exchange rate regime1 have had a very small negative, but insignificant impact on the trade flow