UK imports from Germany, Japan and the US: empirical investigation of the third country effect and the global financial crisis

Choudhry, Taufiq, Hassan, Syed Shabi UI and Papadimitriou, Fotios I. (2013) UK imports from Germany, Japan and the US: empirical investigation of the third country effect and the global financial crisis. Fourth World Finance Conference, Limassol, Cyprus. 30 Jun - 02 Jul 2013.

Abstract

This paper investigates the influence of exchange rate volatility on the real imports of the United Kingdom from Germany, Japan and the US during the period 1991-2011. The sample applied also includes the current global financial crisis. Thus this paper also investigates the potential affect of the crisis on UK imports from these three major trade partners. The paper further investigates the third country affect on the UK imports. The ARDL cointegration method and the constrained error correction (general-to-specific) method are applied to study the relationship between real imports and its determinants (including exchange rate volatility). Conditional variance from the GARCH(p,q) model is applied as exchange rate volatility. Both nominal and real exchange rates are employed in the empirical study. Results indicate a significant effect of the current financial crisis on the exchange rate volatility and some affect on the UK imports from these countries. This is also true when testing for the third country affect.

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Contributors

Author: Taufiq Choudhry

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