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Exchange rate movements' effect on Sri Lanka-China trade

Author

Listed:
  • Kanchana Senanayake Amarasingha Appuhamilage
  • Ahmed Abdulhusain Ali Alhayky

Abstract

Purpose - The purpose of this paper is to examine empirically the effects of exchange rate movements on trade performance with reference to the Sri Lanka-China trade relationship over the quarterly period from 1993 to 2007. Design/methodology/approach - This paper tests this condition for the trade between Sri Lanka and China in two steps. First, it investigates the exchange rate movements on Sri Lanka's aggregate exports and imports between China using selected variables such as the real bilateral exchange rate change, the change in income and the exchange rate volatility. Second, this study constructs a panel regression model using Sri Lanka's sectoral exports and imports between China and tests whether exchange rate movements have detrimental effects on sectoral trade. Findings - The main finding is that bilateral exchange rate changes and exchange rate volatility do play an active role on trade, while income growth changes have less influence in determining the total exports and imports between two countries. The analysis of data shows that changes in real bilateral exchange rate, income and exchange rate volatility are playing a major role in determining sectoral exports and imports between Sri Lanka and China. Therefore, the findings suggest that the movements of exchange rate between these two countries do have significant effects on total trade as well as sectoral trade between Sri Lanka and China.

Suggested Citation

  • Kanchana Senanayake Amarasingha Appuhamilage & Ahmed Abdulhusain Ali Alhayky, 2010. "Exchange rate movements' effect on Sri Lanka-China trade," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 3(3), pages 254-267, October.
  • Handle: RePEc:eme:ceftpp:v:3:y:2010:i:3:p:254-267
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    References listed on IDEAS

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    Cited by:

    1. Bilal KARGI, 2014. "Time Series Analysis about the Relationship between Foreign Trade and Exchange Rate in Turkish Economy," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 7(2), pages 123-133, December.
    2. Muteba Mwamba, John & Dube, Sandile, 2014. "The impact of exchange rate volatility on international trade between South Africa, China and USA: The case of the manufacturing sector," MPRA Paper 64389, University Library of Munich, Germany.

    More about this item

    Keywords

    Exchange rates; Trade; Exports; Imports; China; Sri Lanka;

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