The Effect of Exchange Rate Volatility on International Trade and Foreign Direct Investment (FDI) in Developing Countries along “One Belt and One Road”

The “One Belt and One Road” (OBOR) project was started by the Chinese government with the aim of achieving sustainable economic development and increasing cooperation with other countries. This project has five major objectives, which include (i) increasing trade flow, (ii) encouraging policy coordination, (iii) improving connectivity, (iv) obtaining financial integration, and (v) fortifying closeness between people. This paper aims to analyze the effect of exchange rate volatility on international trade and foreign direct investment (FDI) in developing countries along “One Belt and One Road”. We selected seven developing countries which are part of this project, namely Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. We collected panel data for the period 1995 to 2016 from the U.S. Heritage…