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Export Promotion through Exchange Rate Changes: Exchange Rate Depreciation or Stabilization

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Author Info

  • WenShwo Fang

    ()
    (Feng Chia University)

  • YiHao Lai

    ()
    (Feng Chia University)

  • Stephen M. Miller

    ()
    (University of Nevada, Las Vegas)

Abstract

Exchange rate movements affect exports in two ways—rate depreciation and rate variability (risk). A depreciation raises exports, but the associated exchange rate risk could offset that positive effect. The present paper investigates the net effect for eight Asian countries using a dynamic conditional correlation bivariate GARCH-M model that simultaneously estimates time-varying correlation and exchange rate risk. Depreciation encourages exports, as expected, for most countries, but its contribution to export growth is weak. Exchange rate risk contributes to export growth in Malaysia and the Philippines, leading to positive net effects. Exchange rate risk generates a negative effect for six of the countries, resulting in a negative net effect in Indonesia, Japan, Singapore, and Taiwan and a zero net effect in Korea and Thailand.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 72 (2006)
Issue (Month): 3 (January)
Pages: 611-626

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Handle: RePEc:sej:ancoec:v:72:3:y:2006:p:611-626

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Cited by:
  1. Anson, José & Boffa, Mauro & Helble, Matthias, 2014. "A Short-Run Analysis of Exchange Rates and International Trade with an Application to Australia, New Zealand, and Japan," ADBI Working Papers 471, Asian Development Bank Institute.
  2. Freund, Caroline & Pierola, Martha Denisse, 2008. "Export surges : the oower of a competitive currency," Policy Research Working Paper Series 4750, The World Bank.
  3. Cimoli, Mario & Fleitas, Sebastian & Porcile, Gabriel, 2011. "Real Exchange Rate and the Structure of Exports," MPRA Paper 37846, University Library of Munich, Germany.
  4. Samba MBAYE, 2012. "Beggar-thy-Neighbor Effects of Currency Undervaluation: Is China the Tip of the Iceberg?," Working Papers 201239, CERDI.
  5. P., Srinivasan & M., Kalaivani, 2012. "Exchange Rate Volatility and Export Growth in India: An Empirical Investigation," MPRA Paper 43828, University Library of Munich, Germany.
  6. Catherine Laroche-Dupraz & Marilyne Huchet-Bourdon & Anned-Linz SENADIN, 2012. "Impact du taux de change sur la sécurité alimentaire des pays en développement," Working Papers 169742, Institut National de la Recherche Agronomique, France.
  7. Li, Xiao-Ming, 2011. "How do exchange rates co-move? A study on the currencies of five inflation-targeting countries," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 418-429, February.
  8. Anca GHERMAN & George ŞTEFAN & Adriana FILIP, 2013. "Exchange rate volatility effects on export competitiveness. Romanian Case," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(9(586)), pages 39-50, September.
  9. Joseph Dery Nyeadi & Oswald Atiga & Charles Amoyea Atogenzoya, 2014. "The Impact of Exchange Rate Movement on Export: Empirical Evidence from Ghana," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(3), pages 41-48, July.
  10. Auboin, Marc & Ruta, Michele, 2013. "The relationship between exchange rates and international trade: a literature review," World Trade Review, Cambridge University Press, vol. 12(03), pages 577-605, July.
  11. Gullstrand, Joakim, 2011. "Firm and destination-specific export costs: The case of the Swedish food sector," Food Policy, Elsevier, vol. 36(2), pages 204-213, April.

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