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Exchange Rate Volatility and Its Impact on Commodity Trade Flows between Singapore and Malaysia

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  • Mohsen Bahmani-Oskooee and Hanafiah Harvey

    (The Center for Research on International Economics and Department of Economics, The University of Wisconsin-Milwaukee)

Abstract

Since advent of current float in 1973, the literature on the impact of exchange rate volatility on trade flows has grown so rapidly that most countries have their own literature and Singapore as our country of concern is no exception. Previous studies have investigated the response of aggregate trade flows of Singapore with the rest of the world to exchange rate volatility and have found mostly insignificant link. In this paper we argue that they all suffer from aggregation bias and concentrate on trade flows between Singapore and her major partner, Malaysia. After disaggregating their trade flows by commodity we find that exchange rate volatility has significant short-run effects in 70 out of 156 exporting industries and in 73 out of 155 importing industries. However, short-run effects last into the long run only in 46 exporting and 36 importing industries. We also find that less than 50% of Singapore¡¯s industries were affected by the Asian Financial Crisis in 1997.

Suggested Citation

  • Mohsen Bahmani-Oskooee and Hanafiah Harvey, 2017. "Exchange Rate Volatility and Its Impact on Commodity Trade Flows between Singapore and Malaysia," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(1), pages 17-33, March.
    • Handle: RePEc:jed:journl:v:42:y:2017:i:1:p:17-33
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    References listed on IDEAS

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    Cited by:

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    2. Obumneke Bob Muoneke & Kingsley Ikechukwu Okere & Favour Chidinma Onuoha, 2023. "Extreme exchange rate dynamics and export trade in the selected oil-exporting countries in Africa. Multiple asymmetric threshold non-linear ARDL approach," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 32(6), pages 854-877, August.
    3. Lee, Chien-Hui & Li, Shu-Hui & Lee, Jen-Yu, 2022. "An asymmetric impact analysis of the exchange rate volatility on commodity trade between the U.S. and China," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 399-415.
    4. Bisharat Hussain Chang & Suresh Kumar Oad Rajput & Niaz Ahmed Bhutto, 2019. "Impact of Exchange Rate Volatility on the US Exports: A New Evidence From Multiple Threshold Nonlinear ARDL Model," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-26, June.

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    More about this item

    Keywords

    Exchange Rate Volatility; Industry Data; Singapore; Malaysia; Bounds Testing;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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