How responsive are trade flows between Malaysia and China to the exchange rate? Evidence from industry data

This paper investigates the impact of currency depreciation on bilateral trade between Malaysia and China, especially how a real depreciation of ringgit against the yuan on each industry’s inpayments and outpayments affect the trade balance. We employ disaggregated quarterly data on import and export for 52 industries over the period 1993Q1 to 2012Q4. The results from the bounds testing approach to the cointegration and error-correction model reveal that the real bilateral exchange rate has short and long-run effects on the inpayments and outpayments of the industries. However, the short-run effects shift into the long run in 14 out of 35 industries in the inpayment models and 17 out of 44 industries in the outpayments models. Most of these are small industries producing intermediate goods. According to the ML condition, the depreciation of ringgit against yuan improves Malaysia’s trade balance with China in these industries.     

US–Indonesia trade at commodity level and the role of the exchange rate

Previous studies that assessed the impact of currency depreciation on inpayments and outpayments of Indonesia with her major trading partners did not find much significant results, especially in the trade with the United States. We wonder whether insignificant link between the real rupiah-dollar rate and Indonesia’s inpayments and outpayments with the United States is due to aggregation bias. To answer this question, we disaggregate the trade flows between the two countries by commodity and consider the sensitivity of inpayments of 108 US exporting industries and outpayments of 32 US importing industries from Indonesia. We find that most industries respond to exchange rate changes in the short run. In the long run, however, 32 inpayments schedule and 17 outpayments schedule are significantly affected. A 1% real depreciation of the dollar was found to improve US trade balance by 1.8%.     

The Sensitivity of U.S. Inpayments and Outpayments to Real Exchange Rate Changes: Asymmetric Evidence From Africa

ABSTRACT

A strand of the literature concentrates on assessing the impact of exchange rate changes on a country’s inpayments from and outpayments to its trading partners. Most studies have considered the U.S. experience with partners from OECD but not for those from Africa. We fill this gap by including 14 African partners in our study. We assess not only the symmetric effects of exchange rate changes on the U.S. inpayments from and outpayments to each African partner, but also the asymmetric effects which requires incorporating nonlinear adjustment of the exchange rate. While we found asymmetric effects in the trade with almost all partners in the short run, in a limited number of cases the short-run effects lasted into long-run asymmetric effects. All in all, our findings are partner specific, but they provide more support for using nonlinear models.     

Bilateral and regional trade elasticities of the EU

The traditional way of assessing the impact of currency depreciation and income on the trade balance has been to estimate the elasticity of trade volume to relative prices and income. The previous studies examine the problems associated with using aggregate data. The recent studies rely on bilateral data, yet another problem is that data for export and import prices are not available. Thus, this study proposes an alternative way of assessing the impact of currency depreciation by using the real exchange rate and the impact of income on bilateral trade. The models are applied between the EU and its major trading partners. Furthermore, the analysis includes the six major trading regions along side the eight major trading countries for 1980–2007, on the quarterly basis. This article uses the autoregressive distributive lag (ARDL) approach advocated by Pesaran and Pesaran (1997). Our results indicate a higher importance of income compared to the real exchange rate in defined bilateral export and import demand functions. In addition, the applied CUSUM and CUSUMSQ stability tests confirm the stability of estimated coefficients in most cases.     

Impact of exchange rate uncertainty on commodity trade between US and Sweden

Previous studies that investigated the effects of exchange rate uncertainty on the trade flows of Sweden employed aggregate trade data either between Sweden and the rest of the world or at bilateral level between Sweden and her major trading partners. In this article, we disaggregate the trade data and employ the import and export data from 87 industries that trade between Sweden and the US. We find that exchange rate volatility has significant short-run effects on the trade flows between the two countries in almost two-third of the industries. However, the short-run effects are translated into the long-run effects in one-third of the cases. Furthermore, the real depreciation of krona against the dollar was found to have favourable effects on the overall trade balance between the two countries.     

IMPACT OF EXCHANGE RATE UNCERTAINTY ON COMMODITY TRADE BETWEEN THE US AND AUSTRALIA*

Exchange rate volatility is said to have negative or positive effect on trade flows. Previous studies that considered the impact of exchange rate uncertainty on the trade flows of Australia employed trade data either between Australia and rest of the world or between Australia and her few major trading partners. They were unable to discover any significant impact. In this paper when we disaggregate trade data by commodity between Australia and one of her major trading partners, the US, we find exchange rate volatility to have short‐run effects on trade flows of most industries. However, the short‐run effects last into long run, only in limited cases, though more in export commodities than import ones.     

THE J CURVE: CHINA VERSUS HER TRADING PARTNERS

The short‐run effects of currency depreciation are said to be different from its long‐run effects. In the short run, the trade balance deteriorates and improvement comes after some time; hence, the J‐curve phenomenon. Previous studies that tested the response of the trade balance to exchange rate changes in China employed aggregate trade data and provided mixed results. Indeed, most of them concluded that real depreciation has no long‐run impact on the Chinese trade balance. In this paper, we disaggregate the data by country and using recent advances in time series modelling estimate a trade balance model between China and her 13 major trading partners. We show that real depreciation of the Chinese currency has a favourable impact on her trade balance with a few partners, especially the USA. Not much support is found for the J‐curve hypothesis.     

Bilateral J-curve between the UK vis-à-vis her major trading partners

Currency depreciation is said to worsen the trade balance first before resulting in an improvement, yielding a short-run pattern labelled the J-curve phenomenon. While early studies tested the J-curve by using aggregate trade data, a few recent studies have employed bilateral data, mostly between the US and her major trading partners. In this paper we extend the literature by considering the experience of the UK. We test the phenomenon between the UK and her twenty major trading partners by employing data over 1973Q1–2001Q3 period. In most instances, we find no support for the J-curve in the short-run. In the long run, only in five cases has the exchange rate had significant impact on the bilateral trade balance.     

Does exchange-rate uncertainty matter in the Malaysia–E.U. bilateral trade? An industry level investigation

Due to ambiguity in the past literature, researchers have examined exchange rate volatility effect on trade using disaggregated data in recent years. Previous research has focused more on aggregated data having aggregation bias which has led to unnecessarily over-generalized findings. This study investigates the impact of exchange rate volatility on the Malaysian bilateral trade flows with European Union using industry level data. Our empirical findings, based on auto-regressive distributed lag framework, suggest that many import and export industries experience exchange rate volatility influence in the short run, while a very small number of industries show this effect in the long run. Moreover, the adverse impact of financial crisis (2007–2008) is more prevalent on import industries compared to export industries.     

外商直接投资与天津出口贸易的互动关系——基于脉冲响应函数法的实证分析

本文利用天津1980-2007年的年度统计数据,运用协整分析和格兰杰因果检验方法分析了出口贸易与外商直接投资之间的关系,并利用广义脉冲响应函数和方差分解法进一步分析了两者间的动态关系。研究结果表明,天津的出口贸易与外商直接投资、贸易伙伴国的经济增长和进口贸易之间存在长期稳定的均衡关系,外商直接投资、贸易伙伴国的经济增长和进口贸易都是出口贸易变动的原因。从动态角度看,在短期内,天津出口贸易对外商直接投资冲击的反应短期较为明显,而贸易伙伴国经济增长与进口贸易对出口贸易的影响在短期并不显著;从长期来看,FDI对出口贸易具有明显的替代效应,出口贸易增长主要依赖于进口贸易,而贸易伙伴国经济增长对出口贸易的影响作用十分有限。     

The U.S. trade imbalance and real exchange rate: An application of the heterogeneous panel cointegration method

The United States economy suffers from persistent trade deficits, arising from the so-called ‘global external imbalance’. Can the depreciation of the US dollar improve this phenomenon? This study for the first time applies the heterogeneous panel cointegration method to examine the long-run relationship between the real exchange rate and bilateral trade balance of the U.S. and her 97 trading partners for the period 1973–2006. Using new annual data, the empirical results indicate that the devaluation of the US dollar deteriorates her bilateral trade balance with 13 trading partners, but improves it with 37 trading partners, especially for China. In the panel cointegrated framework, a long-run negative relationship between the real exchange rate and the bilateral trade balance exists for the U.S.     

Commodity trade between Pakistan and the US: is there evidence of the J-curve?

A few studies that have attempted to estimate the short-run (J-curve) and long-run impact of exchange rate depreciation on Pakistan’s trade balance are either based on aggregate trade data between Pakistan and the rest of the world or between Pakistan and her bilateral trading partners. The findings are mixed at best. Considering the trade balance between Pakistan and the US, as one of its major partners, no significant effects have been discovered. Suspecting that the trade flows between the two countries could suffer from another aggregation bias, we disaggregate their trade flows by commodity and consider the trade balance of 45 industries that trade between the two countries. We find significant short-run effects of currency depreciation on the trade balance of 17 industries. The short-run effects last into the long run in 15 cases. The largest industry that account for more than 10% of the trade seems to benefit from real depreciation in the long run.     

NONLINEAR AUTOREGRESSIVE DISTRIBUTED LAG APPROACH AND BILATERAL J‐CURVE: INDIA VERSUS HER TRADING PARTNERS

The J‐curve studies related to India have mostly either used aggregate trade flows of India with the rest of the world or between India and its trading partners. They have all assumed exchange rate changes have symmetric effects on Indian trade balance. In this article, we use partial sum concept combined with the nonlinear autoregressive distributed lag approach of Shin et al. to show that indeed in some instances, there are evidences of asymmetry effects of currency depreciation. This new nonlinear approach provides more support for the J‐curve than the previous linear approaches. (JEL F31)     

Trade Agreements and Trade Opportunities: A Flexible Approach for Modeling Australian Export and Import Elasticities

Patterns of trade have changed enormously over the last 30 years, particularly due to the economic emergence of several Asian countries. With the increasing international tendency for bilateral preferential trade agreements, it is important for countries to be aware of trade substitution possibilities. This paper estimates import and export price elasticities for Australia and its major trading partners in Europe and Asia, 1958 to 2002, using a fully flexible version of the Symmetric Normalized Quadratic aggregator function. Imports and exports are disaggregated into six regions, covering 17 countries. Our results illuminate the (changing) substitution and complementarity patterns for Australian foreign trade, highlighting trading opportunities in the face of a changing international environment.     

Intra‐firm trade,exporting, importing,and firm performance

Abstract This paper examines firm heterogeneity in terms of size, wages, capital intensity, and productivity between domestic and foreign‐owned firms that engage in intra‐firm trade, firms that export and import, firms that import only, and firms that export only. As previously documented, heterogeneity between different groups of trading firms is substantial. Taking into account intra‐firm trade in addition to exporting and importing yields new insights into the productivity advantage previously established for exporting firms. The results presented here show that this premium accrues only to exporters that also import and to exporters that also engage in intra‐firm trade, but not to firms that export only. Using simultaneous quantile regressions, the paper illustrates that heterogeneity within different groups of trading firm is equally large. Some of this within‐group heterogeneity can be attributed to differences in trading partners.     

The J-curve: Malaysia versus her major trading partners

Currency depreciation is said to worsen the trade balance before improving it, hence the J-curve phenomenon. Since introduction of cointegration and error-correction modelling, researchers have tried to distinguish the short-run effects of currency depreciation from its long-run effects. A few studies that have investigated the experience of Malaysia, have relied upon aggregate trade data and have found no strong support for a significant relation between the real value of the ringgit and the Malaysian trade balance. In this article, we disaggregate the data by country and consider Malaysia's bilateral trade balance with her 14 largest trading partners. Using bound testing approach to cointegration and error-correction modelling, we provide some support for the J-curve hypothesis.     

实际汇率与中国双边贸易

本文将中国与中国贸易伙伴国之间的实际汇率引入一个诱导的出口方程中,并加入中国出口的竞争者与中国的贸易伙伴国之间的实际汇率。结果表明,亚洲的一些主要国家和地区是中国出口的竞争者,1997年发生的亚洲金融危机确实使中国1998年和1999年的出口减少。除了海外市场需求和国内供给能力外,中国与贸易伙伴国之间的实际汇率,以及中国出口的竞争者与中国的贸易伙伴国之间的实际汇率对中国的双边贸易也有显著影响。     

实际汇率与中国双边贸易

该文将中国与中国贸易伙伴国之间的实际汇率引入一个诱导的出口方程中,并加入中国出口的竞争者与中国的贸易伙伴国之间的实际汇率.结果表明,亚洲的一些主要国家和地区是中国出口的竞争者,1997年发生的亚洲金融危机确实使中国1998年和1999年的出口减少.除了海外市场需求和国内供给能力外,中国与贸易伙伴国之间的实际汇率,以及中国出口的竞争者与中国的贸易伙伴国之间的实际汇率对中国的双边贸易也有显著影响.     

Statistical analysis of under- and overinvoicing of imports

This paper uses trading partners' data comparisons at three different levels of refinement to verify whether the elimination of an over-valued exchange rate, which itself has been claimed to lead to over-valuation of imports, affects the valuation practice of importers. The advantages of correcting the import and export data of trading partners for eventual discrepancies in the volume of these trade flows is highlighted. Data for Turkey, Pakistan and The Netherlands are used. Turkey devalued in 1970, while Pakistan devalued in 1972. Data availability and the large discrepancy between reported exports to and imports from The Netherlands suggested the analysis of the data for this country.     

Impact of exchange rate volatility on commodity trade between US and Hong Kong

The impact of exchange rate uncertainty on trade flows is still the center of attention in international economics. A few studies that have looked at this effect in Hong Kong have used either aggregate data between Hong Kong and the rest of the world or between Hong Kong and several of her major trading partners. They have been unable to locate any significant effect. Suspecting that existing studies could suffer from aggregation bias, we concentrate on the trade between Hong Kong and the US and disaggregate their trade flows further by commodity. Out of 140 Hong Kong importing industries and 104 exporting industries considered, we find short-run effects in the majority of the industries. The short-run effects translated into the long run in 81 of Hong Kong import industries and 51 of her export industries, a finding that contradicts previous research.