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Dominant Currency and Value-Added Exports

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  • Myoung Shik Choi

Abstract

This study investigates the real effects of exchange rate changes on exports with three key features; pricing in a dominant currency like the US dollar, imported intermediary use in production, and exports dependent on major demanded countries. We test the longitudinal effects of exchange rates using a data set of both gross and value-added bilateral exports. The key finding distinguishes the positive panel effect of US dollar depreciation due to the dollar liquidity effect from the negative panel effects of other currencies depreciations due to the intermediary import effect. The two detailed results stand out mostly due to the impacts of intermediate goods imports. First, the panel effect of currency depreciation on value-added exports is smaller than gross exports. Second, the panel effect of depreciation on intermediary goods exports is bigger than final goods exports. Also, the panel effects of income and exports-FDI feedback are significant, enriching for the relationship between trade flows and foreign investment.

Suggested Citation

  • Myoung Shik Choi, 2022. "Dominant Currency and Value-Added Exports," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 11, September.
    • Handle: RePEc:bjz:ajisjr:2281
    DOI: https://doi.org/10.36941/ajis-2022-0120
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    References listed on IDEAS

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    1. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    2. Myoung Shik Choi, 2017. "The Recent Effects of Exchange Rate on International Trade," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(6), pages 661-689.
    3. repec:bla:obuest:v:61:y:1999:i:0:p:653-70 is not listed on IDEAS
    4. Aizenman, Joshua & Noy, Ilan, 2006. "FDI and trade--Two-way linkages?," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(3), pages 317-337, July.
    5. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-471, June.
    6. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    7. Shiva S. Makki & Agapi Somwaru, 2004. "Impact of Foreign Direct Investment and Trade on Economic Growth: Evidence from Developing Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 795-801.
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    Cited by:

    1. Raksha Jain & Geetha Elangovan & Kishore Lakshminarayanan, 2025. "Do the Macroeconomic Determinants of Export Destinations Matter? The Case of Indian Black Pepper," Journal of Industry, Competition and Trade, Springer, vol. 25(1), pages 1-21, December.

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