Advanced Search
MyIDEAS: Login to save this article or follow this journal

Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies

Contents:

Author Info

  • Myint Moe Chit
  • Marian Rizov
  • Dirk Willenbockel

Abstract

Abstract This paper examines the impact of bilateral real exchange rate volatility on real exports of five emerging East Asian countries among themselves as well as to 13 industrialised countries. We recognise the specificity of the exports between the emerging East Asian and industrialised countries and employ a generalised gravity model. In the empirical analysis we use a panel comprising 25 years of quarterly data and perform unit-root and cointegration tests to verify the long-run relationship among the variables. The results provide strong evidence that exchange rate volatility has a negative impact on the exports of emerging East Asian countries. In addition, the results suggest that the pattern of bilateral exports is influenced by third-country variables. An increase in the price competitiveness of other emerging East Asian countries has a negative impact on a country's exports to a destination market, but the magnitude of the impact is relatively small. These results are robust across different estimation techniques and do not depend on the variable chosen to proxy exchange rate uncertainty. The results of the GMM-IV estimation also confirm the negative impact of exchange rate volatility on exports and suggest that this negative relationship is not driven by simultaneous causality bias. Copyright 2010 Blackwell Publishing Ltd. Journal compilation 2010 Blackwell Publishing Ltd.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/links/doi/10.1111/j.1467-9701.2009.01230.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 33 (2010)
Issue (Month): 2 (02)
Pages: 239-263

as in new window
Handle: RePEc:bla:worlde:v:33:y:2010:i:2:p:239-263

Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0378-5920

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Michael Frommel & Lukas Menkhoff, 2003. "Increasing exchange rate volatility during the recent float," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(12), pages 877-883.
  2. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Department of Economics Working Papers, Department of Economics, Williams College 2000-02, Department of Economics, Williams College.
  3. F. Gerard Adams & Byron Gangnes & Yochanan Shachmurove, 2004. "Why Is China So Competitive? Measuring and Explaining China’s Competitiveness," Working Papers, University of Hawaii at Manoa, Department of Economics 200406, University of Hawaii at Manoa, Department of Economics.
  4. Silvana Tenreyro, 2003. "On the trade impact of nominal exchange rate volatility," Working Papers, Federal Reserve Bank of Boston 03-2, Federal Reserve Bank of Boston.
  5. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," United Kingdom Stata Users' Group Meetings 2003, Stata Users Group 02, Stata Users Group.
  6. Christopher F. Baum & Mustafa Caglayan & Neslihan Ozkan, 2000. "Nonlinear Effects of Exchange Rate Volatility on the Volume of Bilateral Exports," Boston College Working Papers in Economics, Boston College Department of Economics 488, Boston College Department of Economics, revised 30 Jul 2002.
  7. Ramikishen Rajan, 2002. "Exchange Rate Policy Options for Post-crisis Southeast Asia: Is There a Case for Currency Baskets?," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 25(1), pages 137-163, 01.
  8. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, Elsevier, vol. 115(1), pages 53-74, July.
  9. Barry Eichengreen, 2006. "The Parallel-Currency Approach to Asian Monetary Integration," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 432-436, May.
  10. Flood, Robert P & Rose, Andrew K, 1998. "Understanding Exchange Rate Volatility Without the Contrivance of Macroeconomics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1944, C.E.P.R. Discussion Papers.
  11. Karlsson, Sune & Löthgren, Mickael, 1999. "On the power and interpretation of panel unit root tests," Working Paper Series in Economics and Finance 299, Stockholm School of Economics.
  12. Arize, Augustine C & Osang, Thomas & Slottje, Daniel J, 2000. "Exchange-Rate Volatility and Foreign Trade: Evidence from Thirteen LDC's," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 18(1), pages 10-17, January.
  13. Anderton, Robert & Skudelny, Frauke, 2001. "Exchange rate volatility and euro area imports," Working Paper Series, European Central Bank 0064, European Central Bank.
  14. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2007. "China and the Exports of Other Asian Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 143(2), pages 201-226, July.
  15. Huang, Ying & Guo, Feng, 2006. "Is currency union a feasible option in East Asia?: A multivariate structural VAR approach," Research in International Business and Finance, Elsevier, Elsevier, vol. 20(1), pages 77-94, March.
  16. Bayoumi, Tamim & Eichengreen, Barry, 1995. "Is Regionalism Simply a Diversion? Evidence from the Evolution of the EC and EFTA," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1294, C.E.P.R. Discussion Papers.
  17. Franc Klaassen, 2000. "Why is it so Difficult to Find an Effect of Exchange Rate Risk on Trade?," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 0133, Econometric Society.
  18. Barry Eichengreen & Douglas A. Irwin, 1996. "The Role of History in Bilateral Trade Flows," NBER Working Papers 5565, National Bureau of Economic Research, Inc.
  19. Giovanni Dell'Ariccia, 1999. "Exchange Rate Fluctuations and Trade Flows: Evidence from the European Union," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 5.
  20. Sauer, Christine & Bohara, Alok K, 2001. "Exchange Rate Volatility and Exports: Regional Differences between Developing and Industrialized Countries," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 133-52, February.
  21. Paul De Grauwe, 1988. "Exchange Rate Variability and the Slowdown in Growth of International Trade," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 63-84, March.
  22. David Roland Holst & John Weiss, 2004. "ASEAN and China: Export Rivals or Partners in Regional Growth?," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 27(8), pages 1255-1274, 08.
  23. Peter Wilson & Henry Ng Shang Ren, 2007. "The Choice of Exchange Rate Regime and the Volatility of Exchange Rates after the Asian Crisis: A Counterfactual Analysis," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 30(11), pages 1646-1661, November.
  24. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers, University of Liverpool Management School 1999_04, University of Liverpool Management School.
  25. Agnès Bénassy-Quéré & Amina Lahrèche-Revil, 2003. "Trade Linkages and Exchange Rates in Asia: The Role of China," Working Papers 2003-21, CEPII research center.
  26. Hooper, Peter & Kohlhagen, Steven W., 1978. "The effect of exchange rate uncertainty on the prices and volume of international trade," Journal of International Economics, Elsevier, Elsevier, vol. 8(4), pages 483-511, November.
  27. Brada, Josef C & Mendez, Jose, 1988. "Exchange Rate Risk, Exchange Rate Regime and the Volume of International Trade," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 41(2), pages 263-80.
  28. Kwack, Sung Y., 2005. "Exchange rate and monetary regime options for regional cooperation in East Asia," Journal of Asian Economics, Elsevier, Elsevier, vol. 16(1), pages 57-75, February.
  29. Jeffrey A. Frankel & Shang-Jin Wei, 1993. "Emerging Currency Blocs," NBER Working Papers 4335, National Bureau of Economic Research, Inc.
  30. Murat Doğanlar, 2002. "Estimating the impact of exchange rate volatility on exports: evidence from Asian countries," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 9(13), pages 859-863.
  31. Kiyotaka Sato & Zhaoyong Zhang, 2006. "Real Output Co-movements in East Asia: Any Evidence for a Monetary Union?," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 29(12), pages 1671-1689, December.
  32. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  33. Martin J. Bailey & George S. Tavlas, 1988. "Trade and Investment under Floating Rates: The U.S. Experience," Cato Journal, Cato Journal, Cato Institute, Cato Journal, Cato Institute, vol. 8(2), pages 421-449, Fall.
  34. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  35. Mohsen Bahmani-Oskooee & Scott W. Hegerty, 2007. "Exchange rate volatility and trade flows: a review article," Journal of Economic Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 34(3), pages 211-255, September.
  36. Holly, Sean, 1995. "Exchange Rate Uncertainty and Export Performance: Supply and Demand Effects," Scottish Journal of Political Economy, Scottish Economic Society, vol. 42(4), pages 381-91, November.
  37. George Hondroyiannis & P.A.V.B. Swamy & George S. Tavlas & Michael Ulan, 2005. "Some Further Evidence on Exchange-Rate Volatility and Exports," Working Papers, Bank of Greece 28, Bank of Greece.
  38. McKenzie, Michael D, 1999. " The Impact of Exchange Rate Volatility on International Trade Flows," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 13(1), pages 71-106, February.
  39. Franke, Gunter, 1991. "Exchange rate volatility and international trading strategy," Journal of International Money and Finance, Elsevier, Elsevier, vol. 10(2), pages 292-307, June.
  40. O. Cushman, David, 1986. "Has exchange risk depressed international trade? The impact of third-country exchange risk," Journal of International Money and Finance, Elsevier, Elsevier, vol. 5(3), pages 361-379, September.
  41. Peter B. Clark & Shang-Jin Wei & Natalia T. Tamirisa & Azim M. Sadikov & Li Zeng, 2004. "A New Look at Exchange Rate Volatility and Trade Flows," IMF Occasional Papers 235, International Monetary Fund.
  42. Udo Broll & Bernhard Eckwert, 1999. "Exchange Rate Volatility and International Trade," Southern Economic Journal, Southern Economic Association, vol. 66(1), pages 178-185, July.
  43. Anderton, R. & Skudelny, F., 2001. "Exchange Rate Volatility and Euro Area Imports," Papers 64, Quebec a Montreal - Recherche en gestion.
  44. M. Ayhan Kose & Kenneth Rogoff & Eswar Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries," IMF Occasional Papers 220, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:worlde:v:33:y:2010:i:2:p:239-263. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.