real export earnings of oil exporting countries and exchange rate volatility.

Two

measures of volatility were used for both nominal and real exchange rates. The first

was the logarithms of the moving standard deviations. The second corresponds to

polynomial distributed lag of the absolute-percentage-change. They found a positive

relationship between real exports and nominal exchange rate volatility but a negative

relationship when the real exchange rate volatility was included (Bailey et al., 1987).

Most of the trade has traditionally been between developed nations and most

of the applications found in the literature deal with these countries as well.

Nevertheless, with more participation of least developed countries (LDC) and

emerging economies in international trade, analysis using data from these countries

are needed. Early contributions to the literature using developing countries includes

the works of Coes (1981) and Rana (1983). They independently applied Hooper and

Kohlhagen (1978) methodology. Coes had a vast majority of positive and zero effects

of exchange rate volatility on Brazilian exports, while Rana showed evidence of

negative significant effects on ASEAN countries. Caballero and Corbo (1989) used

and moving standard deviation of exchange rates as volatility measure and

implemented ordinary least squares (OLS) and instrumental variables (IV) procedures

to estimate export demand equations for Chile, Colombia, Peru, Philippines, Thailand

and Turkey. They found negative significant effects of exchange rate volatility on

exports. Medhora (1990) studied six countries (Benin, Burkina-Faso, Côte d’Ivoire,

Niger, Senegal, and Togo) from the West African Monetary Union for the 1976-82

period. The common currency of these countries is the CFA which remained pegged

to the French Franc since 1948 (today to the EUR). Hence, after 1973, the volatility

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