Exchange Rate Changes and Trade Performance in Selected Asian Countries

While a growing body of research explores the link between exchange rate changes and trade performance, less empirical attention has been paid to how trade responds to the currency devaluation or appreciation while integrating the traditional macroeconomic drivers of trade performance. The main goal of this paper is to investigate the key drivers of trade performance in Asian economies over recent decades. Using annual data from 13 selected Asian countries spanning between 1986 and 2022, the study employs Dynamic Fixed Effects (DFE) and Common Correlated Effects Mean Group (CCEMG) estimators. The finding shows that while domestic investment and world income are key positive drivers of exports in the short run, only population and real gross domestic product significantly account for positive changes in imports, just as the trade balance is positively influenced by exchange rate and export, with import exerting a negative impact. The Marshall-Lerner condition holds in the long run, with mixed evidence for the J-curve hypothesis across samples. The study recommends sustained investment in productivity, innovation, and diversification.