Impact of Exchange Rate Risks on Trade Flows: Does Regional Integration in Production Matter?

This study examines the impact of exchange rate risks on international trade in the wake of regionalization. Applying panel regression with fixed effects models (FEMs) to a panel dataset covering 61 countries during 2007-2023, this study finds that exchange rate risks hamper multiple aspects of trade flows. Besides, this study discovers that ASEAN [Formula: see text] 3 and RCEP regional integration in production can alleviate the negative impact of exchange rate risks on trade flows. These results suggest that strengthening regional cooperation and enhancing regional integration in production could be potential solutions for countries to overcome the adverse consequences of exchange rate risks.