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The Effects of Real Exchange Rate Volatility on Thailand's Exports to the United States and Japan under the Recent Float

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  • Jiranyakul, Komain

Abstract

This paper investigates whether the real exchange rate uncertainty depresses Thailand’s exports to the United States and Japan and thus causes the trade balances to deteriorate under the floating exchange rate regime. Monthly data from July 1997 to December 2007 are utilized. Industrial production indexes are used as proxies of real income of the two major trading partners. The results from bounds testing for cointegration show that the variables in the export demand are cointegrated, and the Marshall-Lerner condition still holds in the case of United States. Real exchange rate volatility generated by the ARCH(1) process as a measure of uncertainty has a negative effect on exports to Japan, but has no effect on exports to the United States. However, total exports can be harmed by real exchange rate uncertainty for exports to Japan.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 45030.

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Date of creation: 2010
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Publication status: Published in NIDA Development Journal 2.50(2010): pp. 1-18
Handle: RePEc:pra:mprapa:45030

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Keywords: Real exchange rate uncertainty; exports; bounds testing for cointegration;

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  1. 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.
  2. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
  3. Kenen, Peter B & Rodrik, Dani, 1986. "Measuring and Analyzing the Effects of Short-term Volatility in Real Exchange Rates," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 311-15, May.
  4. James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
  5. WenShwo Fang & Stephen M. Miller, 2004. "Exchange rate depreciation and exports: The case of Singapore revisited," Working papers 2004-45, University of Connecticut, Department of Economics.
  6. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  7. Asseery, A. & Peel, D. A., 1991. "The effects of exchange rate volatility on exports : Some new estimates," Economics Letters, Elsevier, vol. 37(2), pages 173-177, October.
  8. Choudhry, Taufiq, 2005. "Exchange rate volatility and the United States exports: evidence from Canada and Japan," Journal of the Japanese and International Economies, Elsevier, vol. 19(1), pages 51-71, March.
  9. 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.
  10. Stilianos Fountas & Kyriacos Aristotelous, 1998. "Has the European Monetary System Led to More Exports? Evidence from Four European Union Countries," Working Papers 31, National University of Ireland Galway, Department of Economics, revised 1998.
  11. 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.
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  1. repec:got:cegedp:121 is not listed on IDEAS
  2. Verheyen, Florian, 2011. "Bilateral exports from Euro Zone countries to the US: Does exchange rate variability play a role?," Center for European, Governance and Economic Development Research Discussion Papers 121, University of Goettingen, Department of Economics.

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