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Exchange Rate Volatility and Intra-Asia Trade: Evidence by Type of Goods

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  • Hsiao Chink Tang

Abstract

type="main" xml:id="twec12095-abs-0001"> This paper examines the impact of intra-Asia exchange rate volatility on intra-Asia trade in primary goods, intermediate goods, equipment goods and consumption goods from 1980 to 2009. For Asia, the evidence shows that as intraregional exchange rate volatility increases, intraregional exports in these goods fall. This adverse impact is even more pronounced in the subregion of Association of Southeast Asian Nations (ASEAN)+5 comprising ASEAN member countries plus the People's Republic of China; Hong Kong, China; Japan; the Republic of Korea; and Taipei, China; and especially among intermediate and equipment exports. Again, the impact magnifies in an even smaller subgroup excluding the smaller ASEAN economies. These results underline the significant impact of exchange rate volatility on the region's production networks. For South Asia, however, exchange rate volatility appears to have a positive impact on exports. Still, caution is warranted given that South Asian economies trade relatively little with each other.

Suggested Citation

  • Hsiao Chink Tang, 2014. "Exchange Rate Volatility and Intra-Asia Trade: Evidence by Type of Goods," The World Economy, Wiley Blackwell, vol. 37(2), pages 335-352, February.
  • Handle: RePEc:bla:worlde:v:37:y:2014:i:2:p:335-352
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    File URL: http://hdl.handle.net/10.1111/twec.2014.37.issue-2
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    Cited by:

    1. Tunç, Cengiz & Solakoglu, M. Nihat, 2016. "Does exchange rate volatility matter for international sales? Evidence from US firm level data," Economics Letters, Elsevier, vol. 149(C), pages 152-156.
    2. Paul De Grauwe & Zhaoyong Zhang & Kiyotaka Sato & Junko Shimizu & Nagendra Shrestha & Shajuan Zhang, 2016. "Industry-specific exchange rate volatility and intermediate goods trade in Asia," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(1), pages 89-109, February.
    3. repec:mes:emfitr:v:53:y:2017:i:12:p:2845-2857 is not listed on IDEAS
    4. Willem Thorbecke, 2015. "Measuring the Competitiveness of China's Processed Exports," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(1), pages 78-100, January.
    5. Keddad, Benjamin, 2016. "How do the Renminbi and other East Asian currencies co-move?," MPRA Paper 83782, University Library of Munich, Germany.
    6. Willem THORBECKE, 2016. "Understanding the Flow of Electronic Parts and Components in East Asia," Discussion papers 16072, Research Institute of Economy, Trade and Industry (RIETI).
    7. Willem Thorbecke, 2015. "Understanding Japan's Capital Goods Exports," The Japanese Economic Review, Japanese Economic Association, vol. 66(4), pages 536-549, December.
    8. Thorbecke, Willem, 2017. "How Would a Slowdown in the People’s Republic of China Affect its Trading Partners?," ADBI Working Papers 634, Asian Development Bank Institute.
    9. Thorbecke, Willem, 2015. "China–US trade: A global outlier," Journal of Asian Economics, Elsevier, vol. 40(C), pages 47-58.

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