THE RELATIONSHIP BETWEEN EXCHANGE RATE AND EXPORTS
  IN ROMANIA USING A VECTOR AUTOREGRESSIVE MODEL


                         Carmen Sandu, “A. I. Cuza” University of Iaşi
                         Nicolae Ghiba, “A. I. Cuza” University of Iaşi

ABSTRACT: In this paper we analyze the exchange rate influence on exports volume in
Romania using a vector autoregressive model (VAR). Our analysis, relative to the 2003Q2-
2011Q1 period, reflects a negative relationship for the first lag and a positive one in the
second lag. Considering the first lag as being significant, an increase of the exchange rate
level has effects in decreasing exports volume. Also, according to impulse-response function,
a shock in the exchange rate has significant effects on exports after two periods. Variance
decomposition shows a weaker influence, less than 10 percent.

Key words: exchange rate, volatility, Romanian leu, international trade, depreciation, appreciation.

JEL codes: F31, C32, E31