China-Malaysia’s long run trading and exchange rate: complementary or conflicting?
AbstractThis paper examines the long run dynamics of exchange rate and bilateral export-import flows between China and Malaysia. Our analysis contributed in using high frequency monthly data for the recent period from January 1990 to January 2008, based on the Autoregressive Distributed Lag bound testing procedure, the fully modified OLS, dynamic OLS and rolling estimations, as well as the generalised impulse response (IRF) and variance decomposition (VDC) analyses. Our empirical findings reveal that the Marshall-Lerner condition holds in the long run but the export-import demands do not adhere to the J-curve pattern. And, expansionary effect is of greater evidence for Malaysia due to real exchange shocks but inconclusive for China. More important, the VDC results imply that China-Malaysia trade is along the sustainable path. In brief, the study supports for the complementary role of China instead of conflicting (competing) features in the China-Malaysia bilateral trading
Download InfoIf 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.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 33585.
Date of creation: 11 Jun 2011
Date of revision:
Exchange rates; J-curve; Marshall-Lerner Condition; ARDL Bound Test; Rolling; FMOLS; DOLS;
Find related papers by JEL classification:
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-01 (All new papers)
- NEP-INT-2011-10-01 (International Trade)
- NEP-SEA-2011-10-01 (South East Asia)
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.:
- repec:fth:inseep:9645 is not listed on IDEAS
- Kanta Marwah & Lawrence R. Klein, 1996. "Estimation of J-Curves: United States and Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 523-39, August.
- Masih, Abul M. M. & Masih, Rumi, 1999. "Are Asian stock market fluctuations due mainly to intra-regional contagion effects? Evidence based on Asian emerging stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 7(3-4), pages 251-282, August.
- Barry Eichengreen & Ricardo Hausmann, 1999.
"Exchange Rates and Financial Fragility,"
NBER Working Papers
7418, National Bureau of Economic Research, Inc.
- Zhang, Zhaoyong, 1998. "Does Devaluation of the Renminbi Improve China’s Balance of Trade?," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 51(3), pages 437-445.
- Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
- Tihomir Stucka, 2004. "The Effects of Exchange Rate Change on the Trade Balance in Croatia," IMF Working Papers 04/65, International Monetary Fund.
- James H. Stock & Mark W. Watson, 1991.
"A simple estimator of cointegrating vectors in higher order integrated systems,"
Working Paper Series, Macroeconomic Issues
91-3, Federal Reserve Bank of Chicago.
- Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
- Jaleel Ahmad & Jing Yang, 2004. "Estimation of the J-Curve in China," Economics Study Area Working Papers 67, East-West Center, Economics Study Area.
- M Bahmani-Oskooee & I Miteza, 2003. "Are Devaluations Expansionary or Contractionary? A survey article," Economic Issues Journal Articles, Economic Issues, vol. 8(2), pages 1-28, September.
- Zhang, Yin & Wan, Guanghua, 2007.
"What accounts for China's trade balance dynamics?,"
Journal of Policy Modeling,
Elsevier, vol. 29(6), pages 821-837.
- Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany.
- Shaghil Ahmed & Christopher J. Gust & Steven B. Kamin & Jonathan Huntley, 2002. "Are depreciations as contractionary as devaluations? A comparison of selected emerging and industrial economies," International Finance Discussion Papers 737, Board of Governors of the Federal Reserve System (U.S.).
- Rose, Andrew K. & Yellen, Janet L., 1989. "Is there a J-curve?," Journal of Monetary Economics, Elsevier, vol. 24(1), pages 53-68, July.
- Ramkishen S. Rajan & Chung-Hua Shen, 2002. "Are crisis-induced devaluations contractionary?," Pacific Basin Working Paper Series 2002-06, Federal Reserve Bank of San Francisco.
- Bahmani-Oskooee, Mohsen & Ratha, Artarana, 2007. "Bilateral S-curve between Japan and her trading partners," Japan and the World Economy, Elsevier, vol. 19(4), pages 483-489, December.
- Mohsen Bahmani-Oskooee & Hanafiah Harvey, 2006. "How sensitive are Malaysia's bilateral trade flows to depreciation?," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1279-1286.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Mohsen Bahmani-Oskooee & Hanafiah Harvey, 2010. "The J-curve: Malaysia versus her major trading partners," Applied Economics, Taylor & Francis Journals, vol. 42(9), pages 1067-1076.
- repec:ebl:ecbull:v:5:y:2003:i:18:p:1-13 is not listed on IDEAS
- Zhang, Zhichao, 2001. " China's Exchange Rate Reform and Exports," Economic Change and Restructuring, Springer, vol. 34(1-2), pages 89-112.
- Paul R. Krugman & Richard E. Baldwin, 1987. "The Persistence of the U.S. Trade Deficit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 1-56.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.