Short-Run Effects of Exchange Rate Changes on Terms of Trade and Trade Balance (Incidence a court terme des variations du taux de change sur les termes de l'echange et la balance commerciale) (Efectos a corto plazo de las variaciones del tipo de cambio sobre la relacion de intercambio y la balanza comercial)

Erich Spitaller

doi:10.2307/3866715

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

Global Economy Journal ◽

10.1515/gej-2017-0055 ◽

2017 ◽

Vol 17 (4) ◽

pp. 20170055

Author(s):

Mohsen Bahmani-Oskooee ◽

Hanafiah Harvey

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Bilateral Trade ◽

Research Direction ◽

Asymmetric Effects ◽

Nonlinear Ardl ◽

Long Run ◽

Ardl Approach ◽

Short Run ◽

Exchange Rate Changes

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.

The short-run and long-run trade balance response to exchange rate changes in Malawi

Journal of Development and Agricultural Economics ◽

10.5897/jdae12.023 ◽

2012 ◽

Vol 4 (8) ◽

Cited By ~ 2

Author(s):

Samson Kwalingana,

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Long Run ◽

Short Run ◽

Exchange Rate Changes

IS THERE J-CURVE EFFECT IN THE COMMODITY TRADE OF SINGAPORE WITH MALAYSIA? AN EMPIRICAL STUDY

The Singapore Economic Review ◽

10.1142/s0217590816500235 ◽

2018 ◽

Vol 63 (03) ◽

pp. 567-591

Author(s):

MOHSEN BAHMANI-OSKOOEE ◽

HANAFIAH HARVEY

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Commodity Trade ◽

Long Run ◽

J Curve ◽

Trading Partners ◽

Short Run ◽

Exchange Rate Changes ◽

Small Industries ◽

The Impact

A previous study that investigated the impact of exchange rate changes on the trade balance of Singapore with each of its 13 largest trading partners on bilateral basis found significant long-run effects in four out of 13 cases. In the trade balance between Singapore and Malaysia as a major partner, the real exchange rate had neither short-run nor long-run significant effects. To reduce the aggregation bias, in this paper, we disaggregate the trade flows between the two countries by industry and consider the trade balance of each of the 136 industries that trade between the two countries. We find that the trade balance of 79 industries are affected by exchange rate changes in the short run. However, short-run effects last into the long run in only 19 industries which mostly happen to be small industries.

Currency Depreciation, Trade Balance and Intra-Industry Trade Interactions in Turkey’s OECD Trade

International Journal of Economics and Finance ◽

10.5539/ijef.v8n4p8 ◽

2016 ◽

Vol 8 (4) ◽

pp. 8 ◽

Cited By ~ 1

Author(s):

Mehmet Demiral

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Real Effective Exchange Rate ◽

Series Data ◽

Adjustment Process ◽

Industry Trade ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

Effective Exchange Rate

This study re-examines the determinants of Turkey’s trade balance in its manufactures trade with 33 OECD-member countries for the short-run and the long-run. Unlike other studies, in the relationships we also control the moderating effects of the availability of import substitutes proxied by intra-industry trade. We analyze quarterly aggregated time-series data of the period spanning from 1998.QI to 2015.QIII, following the autoregressive distributed lag (ARDL) bounds testing approach to the cointegration and the error correction modeling. Estimation results reveal that real effective exchange rate, together with domestic and foreign incomes are still among the core determinants of Turkey’s trade balance in the manufacturing sectors. There is no significant impact of domestic final oil prices that also include all the taxes on gasoline. The trade balance depends on domestic income negatively and the aggregated income of the OECD countries positively. The finding that real depreciation of Turkish lira against to those of Turkey’s OECD trade partners improves trade balance in both the short-run and the long-run, indicates no evidence of J-curve adjustment process. Unsurprisingly, the intra-industry trade seems to be an important factor that moderates the elasticities of trade balance to its determinants, especially to real effective exchange rate and domestic income. Overall results underline the importance of import-substitution capability besides the export-oriented production to ease the longstanding large trade deficits for Turkey.

The Effect of Real Exchange Rate on Trade Balance in a Resource-Rich Economy: The Case of Mongolia

Foreign Trade Review ◽

10.1177/0015732518797184 ◽

2018 ◽

Vol 53 (4) ◽

pp. 211-224 ◽

Cited By ~ 2

Author(s):

Gan-Ochir Doojav

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Developing Economies ◽

Jel Classification ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Short Run ◽

Exchange Rate Depreciation

For resource-rich developing economies, the effect of real exchange rate depreciation on trade balance may differ from the standard findings depending on country specific characteristics. This article employs vector error correction model to examine the effect of real exchange rate on trade balance in Mongolia, a resource-rich developing country. Empirical results show that exchange rate depreciation improves trade balance in both short and long run. In particular, the well-known Marshall–Lerner condition holds in the long run; however, there is no evidence of the classic J-curve effects in the short run. The results suggest that the exchange rate flexibility may help to deal effectively with current account deficits and exchange rate risk. JEL Classification: C32, C51, F14, F32

Research On Monetary Neutrality: Evidence From Exchange Rate And Trade Balance Of G-7 Countries

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v24i2.1351 ◽

2011 ◽

Vol 24 (2) ◽

Cited By ~ 1

Author(s):

Doh-Khul Kim

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Monetary Shocks ◽

Font Size ◽

Long Run ◽

Short Period ◽

Short Run ◽

Monetary Neutrality ◽

Nominal Shocks

According to a recent paper by Fisher and Huh (2002), in contrast to a long-run neutrality hypothesis, nominal shocks have long-run effects on a country’s real exchange rate and trade balance. However employing a similar method (VAR) with identical restrictions (long-run neutrality and short-run recursive hypotheses), this paper shows that the effects on the real exchange rate are much shorter in this G-7 country study than what Fisher and Huh (2002) contend. Further, the trade balance improves for a short period of time, from which it can conclude there is a shorter existence of the depreciation effect in response to expansionary monetary shocks, which supports the long-run neutrality hypothesis in an open macroeconomic framework.

Different Approaches to Merchandise Trade Balance in Pakistan

Global Business Management Review (GBMR) - Vol 12 No 2 (2020): Global Business Management Review ◽

10.32890/gbmr2020.12.2.2 ◽

2020 ◽

Vol 12 (Number 2) ◽

pp. 19-30

Author(s):

Yousuf Aboya ◽

Arsalan Hussain ◽

Rohail Hassan ◽

Hassan Mujtaba Nawaz Saleem ◽

Aamir Hussain Siddiqui

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Trade Deficit ◽

Real Effective Exchange Rate ◽

Series Data ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

Merchandise Trade ◽

Effective Exchange Rate

The current study empirically examines the three major approaches to trade balance for Pakistan by utilizing the yearly data from 1972 to 2016. Monetary, elasticity, and absorption approaches were tested by developing a model that incorporates all three approaches. The significant contribution of the study is that it uses only the merchandise trade deficit account, which includes trade of only physical goods. The study used time-series data; therefore, variables have been tested for the stationarity, and it is found that there is a combination of I (0) and I (1) variables, so ARDL bounds testing approach to co-integration has been employed to find the short run and long run associations among the variables. The bound test results discovered that there is a presence of stable long-term association among the merchandise trade deficit account, real broad money supply, real effective exchange rate, and real domestic absorption. The results further revealed that merchandise trade discrepancy is determined purely by the real effective exchange rate, which specifies that the exchange rate's devaluation increases the deficit in the long run whereas in the short-run increase in domestic absorption decreases the merchandise trade deficit.

Short-run and long-run effects of exchange rate change on trade balance: Evidence from China and its trading partners

Japan and the World Economy ◽

10.1016/j.japwor.2012.07.001 ◽

2012 ◽

Vol 24 (4) ◽

pp. 266-273 ◽

Cited By ~ 19

Author(s):

Chun-Hsuan Wang ◽

Chun-Hung A. Lin ◽

Chih-Hai Yang

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Rate Change ◽

Exchange Rate Change ◽

Long Run ◽

Trading Partners ◽

Short Run

ASYMMETRIC IMPACT OF EXCHANGE RATE CHANGES ON THE TRADE BALANCE: DOES GLOBAL FINANCIAL CRISIS MATTER?

Annals of Financial Economics ◽

10.1142/s201049521850015x ◽

2018 ◽

Vol 13 (04) ◽

pp. 1850015 ◽

Cited By ~ 7

Author(s):

BISHARAT HUSSAIN CHANG ◽

SURESH KUMAR OAD RAJPUT ◽

NIAZ HUSSAIN GHUMRO

Keyword(s):

Exchange Rate ◽

Financial Crisis ◽

Trade Balance ◽

Global Financial Crisis ◽

Sample Period ◽

Asymmetric Effect ◽

Distributed Lag ◽

Long Run ◽

Exchange Rate Changes ◽

The Global Financial Crisis

Recent studies have been mainly focusing on whether exchange rate changes have a symmetric or asymmetric effect on the trade balance. We revisit this question in the context of US and further extend previous studies by determining whether the relationship between these underlying variables change as a result of the global financial crisis. We use both linear autoregressive distributed lag (ARDL) and non-linear ARDL models for the whole sample period as well as in the pre- and post-crisis periods. Findings suggest that exchange rate changes have an asymmetric effect on the trade balance; however, the asymmetric behavior of the underlying variables change as a result of the financial crisis. In the short run, exchange rate asymmetrically affects trade balance in the post-crisis period only. In the long run, there is an asymmetric effect for all sample periods, where only the devaluation of currency significantly affects the trade balance when the whole sample period is selected. On the other hand, in pre- and post-crisis periods, only appreciation of currency significantly affects the trade balance. This study indicates that determining the asymmetric relationship without considering the global financial crisis may lead to spurious results.

Do Exchange Rate Changes Have Asymmetric or Symmetric Effects on the Demand for Money in the Gambia

International Journal of Accounting and Financial Reporting ◽

10.5296/ijafr.v9i4.15705 ◽

2019 ◽

Vol 9 (4) ◽

pp. 276

Author(s):

Kebba Bah ◽

Karamat Khan ◽

Artif Taufiq Nurrachman Aziez ◽

Ali Kishwar

Keyword(s):

Exchange Rate ◽

The Gambia ◽

Demand For Money ◽

Asymmetric Effects ◽

On Demand ◽

Nonlinear Ardl ◽

Long Run ◽

Short Run ◽

Exchange Rate Changes ◽

The Relationship

In trying to explain the relationship between exchange rate and demand for money researchers have applied different models. In this paper, we applied both the linear and nonlinear ARDL to check the effects of exchange rate changes on the demand for money (M1 and M2) in The Gambia. The result revealed that the demand for money is cointegrated with its determinants and have a stable short-run relationship. It also revealed that exchange rate changes have only short-run asymmetric effects on demand for money (M1 or M2) but don’t have long-run effects.