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The Asymmetric Effects of Exchange Rate Changes on the Trade Balance of Singapore

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Listed:
  • Mohsen Bahmani-Oskooee

    (Department of Economics, University of Wisconsin-Milwaukee, Milwaukee, WI53201, USA)

  • Hanafiah Harvey

    (Department of Economics, Penn State University, Mont Alto, PA17237, USA)

Abstract

Previous studies that tested the short-run and long-run effects of exchange rate changes on trade balances assumed that the effects are symmetric. The more recent research direction has now changed to investigating the possibility of asymmetric effects. In this paper, we assess the short-run and long-run effects of exchange rate changes on the bilateral trade balances of Singapore with her 11 partners. By applying the nonlinear ARDL approach, which separates appreciations from depreciations, we find that exchange rate changes have short-run asymmetric effects in most models. The short-run effects, however, lasted into the long run in a few models. In the long run, while depreciation improves Singapore’s trade balance with the U.S., it hurts it with Malaysia and China. These three partners account for almost 50 % of Singapore’s trade.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Hanafiah Harvey, 2017. "The Asymmetric Effects of Exchange Rate Changes on the Trade Balance of Singapore," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 17(4), pages 1-11, December.
  • Handle: RePEc:wsi:gejxxx:v:17:y:2017:i:04:n:gej-2017-0055
    DOI: 10.1142/GEJ-2017-0055
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    3. Trofimov, Ivan D., 2020. "Real Exchange Rate and the Dynamics of Services Trade Balance in the UK: A Linear and Non-linear ARDL Analysis," MPRA Paper 106703, University Library of Munich, Germany.
    4. Nathan Audu & Titus Obiezue, 2022. "Exchange Rate and Trade in Services Nexus in Nigeria: A Non-Linear ARDL Approach," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 8(1), pages 79-96, January.
    5. Nazif Durmaz & John Kagochi, 2022. "Asymmetric Exchange Rate Pass-Through in Turkish Imports of Cocoa Beans," JRFM, MDPI, vol. 15(4), pages 1-11, April.
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    7. Pat Obi & Godwin-Charles Ogbeide, 2022. "The Mediating Effects of Implied Volatility and Exchange Rate on the U.S. Tourism-Growth Nexus," JRFM, MDPI, vol. 15(3), pages 1-16, February.
    8. Sharaf, Mesbah & Shahen, Abdelhalem, 2022. "Asymmetric Impact of Real Effective Exchange Rate Changes on Domestic Output Revisited: Evidence from Egypt," Working Papers 2022-6, University of Alberta, Department of Economics.
    9. Bilgin, Cevat, 2020. "Asymmetric Effects of Exchange Rate Changes on Exports: A Sectoral Nonlinear Cointegration Analysis for Turkey," MPRA Paper 101316, University Library of Munich, Germany.
    10. Emmanuel Uche & Sunday Ikedinobi Nwamiri, 2022. "Dynamic Effects of Exchange Rate Movements on Productivity Levels: New Evidence From Nigeria Based on NARDL," Journal of Development Policy and Practice, , vol. 7(1), pages 96-111, January.
    11. Trofimov, Ivan D., 2020. "Is There a J-Curve Effect in the Services Trade in Canada? A Panel Data Analysis," MPRA Paper 106704, University Library of Munich, Germany.
    12. Brun,Martin & Gambetta,Juan Pedro & Varela,Gonzalo J., 2020. "Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan," Policy Research Working Paper Series 9353, The World Bank.
    13. Yixiao Jiang & George K. Zestos & Zachary Timmerman, 2020. "A Vector Error Correction Model for Japanese Real Exports," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(3), pages 297-311, September.

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    Keywords

    asymmetry analysis; J-curve; Singapore; nonlinear ARDL approach;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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