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Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies

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  • Myint Moe Chit
  • Marian Rizov
  • Dirk Willenbockel

Abstract

Abstract This paper examines the impact of bilateral real exchange rate volatility on real exports of five emerging East Asian countries among themselves as well as to 13 industrialised countries. We recognise the specificity of the exports between the emerging East Asian and industrialised countries and employ a generalised gravity model. In the empirical analysis we use a panel comprising 25 years of quarterly data and perform unit-root and cointegration tests to verify the long-run relationship among the variables. The results provide strong evidence that exchange rate volatility has a negative impact on the exports of emerging East Asian countries. In addition, the results suggest that the pattern of bilateral exports is influenced by third-country variables. An increase in the price competitiveness of other emerging East Asian countries has a negative impact on a country's exports to a destination market, but the magnitude of the impact is relatively small. These results are robust across different estimation techniques and do not depend on the variable chosen to proxy exchange rate uncertainty. The results of the GMM-IV estimation also confirm the negative impact of exchange rate volatility on exports and suggest that this negative relationship is not driven by simultaneous causality bias. Copyright 2010 Blackwell Publishing Ltd. Journal compilation 2010 Blackwell Publishing Ltd.

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  • Myint Moe Chit & Marian Rizov & Dirk Willenbockel, 2010. "Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies," The World Economy, Wiley Blackwell, vol. 33(2), pages 239-263, February.
  • Handle: RePEc:bla:worlde:v:33:y:2010:i:2:p:239-263
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    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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