The Impact of Exchange Rate Volatility on Indonesia’s Exports to the USA: An Application of ARDL Bounds Testing Procedure
AbstractThis paper investigates the long-run and short-run impacts of exchange rate volatility on Indonesia’s exports of priority commodities to the United States of America over the monthly period 1997-2005. Estimates of cointegration relations are obtained using ARDL bounds testing procedure. Estimates of the short-run dynamics are obtained using an error-correction model. The results show significant positive and negative coefficients among the range of commodities. However, in the long-run, majority of commodities tend to support the traditional view that higher exchange rate of volatility leads to higher cost and to less foreign trade. The net effect of exchange rate uncertainty on production and exports depends on the degree of relative risk aversion of the exporter of various commodities. This ultimately influences the reallocation of resources by participants.
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Bibliographic InfoPaper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 200610.
Length: 34 pages
Date of creation: Dec 2006
Date of revision: Dec 2006
Publication status: Published in International Journal of Applied BUsiness and Economic Research(IJABER) vol. 5(1)
Exchange rate volatility; exports; ARDL bounds testing; error-correction model; Indonesia;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-31 (All new papers)
- NEP-INT-2007-03-31 (International Trade)
- NEP-SEA-2007-03-31 (South East Asia)
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