scholarly journals Are the Responses of Sectoral Energy Imports Asymmetric to Exchange Rate Volatilities in Pakistan? Evidence From Recent Foreign Exchange Regime

2021 ◽  
Vol 9 ◽  
Author(s):  
Abdul Saqib ◽  
Tze-Haw Chan ◽  
Alexey Mikhaylov ◽  
Hooi Hooi Lean
Keyword(s):  
Exchange Rate ◽  
Crude Oil ◽  
Foreign Exchange ◽  
Exchange Rate Volatility ◽  
Asymmetric Effects ◽  
Unit Root Testing ◽  
Long Run ◽  
Short Run ◽  
Bound Test

Growing energy demand but stagnant production followed by volatile exchange rate leads Pakistan to energy imbalances and potential economic contraction. Yet, studies on sectoral energy imports are limited and inconclusive without accessing the asymmetric effect of currency fluctuations. We examine the impacts of Pakistani rupee volatility on monthly energy imports based on the nonlinear autoregressive distributed lag (NARDL) estimations. Augmented Dickey–Fuller and Phillips–Perron tests were used to conduct unit root testing, and the bound testing approach was used to examine the long-term cointegration. The long-run asymmetry was tested with the Wald test, and using the NARDL model, we examined both short-run and long-run asymmetric effects of exchange rate volatility on energy imports. The bound test was established and supported through ECMt−1 (t-test), cointegrating the relationship between exchange rate volatility and energy imports in a long term. Among others, both short-run and long-run asymmetric effects were found for crude oil, coal, electricity, and petroleum products. Rupee depreciation increased crude oil and electricity imports, while the appreciation effects were insignificant. Overall, the empirical assessment reveals that the foreign exchange volatility effect is sectoral specific and asymmetric in Pakistan. It offers new insights into re-strategizing the energy policy and refining the import substitution plan.

Asymmetric Impact of Exchange Rate Volatility on Commodity Trade Between Pakistan and China

2020 ◽  
pp. 097215092091628
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Ahmed Usman ◽  
Sana Ullah
Keyword(s):  
Exchange Rate ◽  
Linear Models ◽  
Exchange Rate Volatility ◽  
Trade Flows ◽  
Annual Data ◽  
Asymmetric Effects ◽  
Long Run ◽  
Short Run ◽  
Asymmetric Impact ◽  
Almost All

China is the largest trading partner of Pakistan. Therefore, it is very important to consider the trade flows between Pakistan and China and their response to rupee–yuan volatility. Previous research assumed that response of trade flows to measure of volatility is symmetric. In this study, our basic objective is to check whether the trade flows respond to volatility in a symmetric or asymmetric manner. Annual data over the period 1980–2018 for 14 Pakistani industries exporting to and 34 industries importing from China are analyzed. We find short-run asymmetric effects of exchange rate volatility in almost all industries that last into long-run asymmetric effects in 40–50 per cent of industries. Non-linear models yielded more significant effects of volatility than the traditional linear models.

Exchange rate volatility and exports from India: a commodity-level panel data analysis

2019 ◽  
Vol 12 (1) ◽  
pp. 23-44
Author(s):  
Chandan Sharma
Keyword(s):  
Exchange Rate ◽  
Panel Data ◽  
Exchange Rate Volatility ◽  
Nominal Exchange Rate ◽  
Exchange Rate Risk ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
The Relationship

PurposeThis study aims to examine the relationship between exchange rate risk and export at commodity level for the Indian case.Design/methodology/approachThe monthly panel data used for analysis are at a disaggregated level, which cover around 100 products, encompassing all merchandize sectors for the period spanning from 2012:12 to 2017:11. To measure the exchange rate volatility, the authors use real as well as nominal exchange rate concepts and predict the volatility of exchange rate using the autoregressive conditional heteroscedastic-based model. They use pooled mean group, mean group and common correlated effects mean group estimator that is suitable for the objectives and data frequency.FindingsThe empirical analysis indicates both short- and long-term negative effects of exchange rate variations on exporting. Specifically, in the long run, real exchange rate as well as nominal exchange rate volatility has significant effects on export performance, yet, the effects of uncertainty of nominal exchange rate is much severe and intense. In the short run, it is the nominal exchange rate uncertainty that hurts exports from India. Nevertheless, the short-run effect is much lesser than the long-run, supporting the argument that the short-term exchange rate risk can be hedged, at least partially, through financial instruments; however, uncertainty of the long-term horizon cannot be hedged easily and cost-effectively.Practical implicationsReducing uncertainty and attaining stability in exchange rate and price level should be an important policy objective in developing countries such as India to achieve higher export growth, both in the short and long run.Originality/valueUnlike previous studies, this paper tests the relationship using micro-level data and uses advanced econometric techniques that are likely to provide more precise information regarding the association between exchange rate volatility and trade flows.

scholarly journals Exchange Rate Volatility and Sectoral Analysis of Non-Oil Export in Nigeria

2021 ◽  
Vol 24 (1) ◽  
pp. 21-36
Author(s):  
Lukman Oyeyinka Oyelami ◽  
Omowumi M. Ajeigbe
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Sectoral Analysis ◽  
Long Run ◽  
Oil Export ◽  
Negative Effect ◽  
Short Run ◽  
Oil Sector ◽  
Export Industries ◽  
Bound Test

Abstract The paper seeks to assess the industry-based effect of exchange rate volatility on the export of non-oil sector in Nigeria. Theoretically and empirically, volatility-trade link is ambiguous. The paper employed bound test for co-integration between exchange rate volatility and exports of non-oil products. Empirically, the results show that we can accept the hypothesis of no co-integration between volatility and export of non-oil industries in most cases. Therefore, the study concludes that the exchange rate volatility can actually produce negative effect on non-oil export industries in the short-run especially the big industries (Agriculture, food and manufacturing) but this effect does not linger into the long-run and this suggests that most of these industries have been able to develop a mechanism to cope with exchange rate volatility problem in the long-run.

ASYMMETRIC EFFECTS OF EXCHANGE RATE VOLATILITY ON BILATERAL TRADE BETWEEN TAIWAN AND INDONESIA

2020 ◽  
Vol 65 (04) ◽  
pp. 857-888
Author(s):  
MEI-SE CHIEN ◽  
NUR SETYOWATI ◽  
CHIH-YANG CHENG
Keyword(s):  
Exchange Rate ◽  
Bilateral Trade ◽  
Exchange Rate Volatility ◽  
Asymmetric Effect ◽  
Ardl Model ◽  
Asymmetric Effects ◽  
Long Run ◽  
Short Run

This paper investigates the effect of exchange rate volatility on bilateral trade between Taiwan and Indonesia via 19 export and import industries. Considering the existence of an asymmetric effect of exchange rate volatility on trade, we employ an asymmetric ARDL model and arrive at the following main results. First, the long-run asymmetric effect of exchange rate volatility shows far higher impacts on Taiwan’s exports to Indonesia than on Taiwan’s imports from Indonesia. Second, the short-run asymmetric effect of exchange rate volatility causes unstable changes on the trade amounts for most of Taiwan’s export and import industries with Indonesia.

Exchange rate volatility and Turkish–German commodity trade: an asymmetry analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Huseyin Karamelikli
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Trade Flows ◽  
Commodity Trade ◽  
Content Type ◽  
Asymmetric Effects ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
Turkish German

Purpose The purpose of this paper is to show that in some industries the linear model may not reveal any significance link between exchange rate volatility and trade flows but once nonlinear adjustment of exchange rate volatility is introduced, the nonlinear model reveals significant link. Design/methodology/approach This paper uses the linear ARDL approach of Pesaran et al. (2001) and the nonlinear ARDL approach of Shin et al. (2014) to assess asymmetric effects of exchange rate volatility on trade flows between Germany and Turkey. Findings This paper consider the experiences of 75 2-digit industries that trade between Turkey and Germany. When the study assumed the effects of volatility to be symmetric, the study found short-run effects in 31 (30) Turkish (German) exporting industries that lasted into the long run in only 10 (13) Turkish (German) exporting industries. However, when the study assumed asymmetric effects and relied upon a nonlinear model, the study found short-run asymmetric effects of volatility on exports of 55 (56) Turkish (German) industries. Short-run asymmetric effects lasted into long-run asymmetric effects in 10 (25) Turkish (German) exporting industries. All in all, we found that almost 25% of trade is hurt by exchange rate volatility. Originality/value This is the first paper that assesses the possibility of asymmetric effects of exchange rate volatility on German–Turkish commodity trade.

scholarly journals The Impact of Exchange Rate on Bangladesh’s Export: A Cointegration Approach

2020 ◽  
pp. 22-30
Author(s):  
Takrima Sayeda
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange Market ◽  
Export Performance ◽  
Long Run ◽  
Time Period ◽  
Floating Exchange Rate ◽  
Short Run ◽  
Year 2000 ◽  
The Impact

The purpose of the paper is to see if there is any relationship exist between free floating exchange rate and export performance of Bangladesh. It inspects the monthly data of exchange rate and export value for the time period between year 2000 and 2017. It utilized the Johansen [1] cointegration approach to identify the extent of long run and short run relationship between them. The study could not establish neither any long term trend nor any short term dynamics between the variables. Respective variables are significantly related to their own immediate past values. Distant past values do not have any implications. This study suggests that short run macroeconomic policy would be beneficial to influence the foreign exchange market and eventually the performance of export of Bangladesh.

scholarly journals The dynamic effect of exchange-rate volatility on Turkish exports: Parsimonious error-correction model approach

2015 ◽  
Vol 62 (4) ◽  
pp. 429-451 ◽  
Author(s):  
Erdal Demirhan ◽  
Banu Demirhan
Keyword(s):  
Exchange Rate ◽  
Error Correction ◽  
Exchange Rate Volatility ◽  
Dynamic Effect ◽  
Error Correction Model ◽  
Impulse Response Functions ◽  
Correction Model ◽  
Long Run ◽  
Export Volume ◽  
Short Run

This paper aims to investigate the effect of exchange-rate stability on real export volume in Turkey, using monthly data for the period February 2001 to January 2010. The Johansen multivariate cointegration method and the parsimonious error-correction model are applied to determine long-run and short-run relationships between real export volume and its determinants. In this study, the conditional variance of the GARCH (1, 1) model is taken as a proxy for exchange-rate stability, and generalized impulse-response functions and variance-decomposition analyses are applied to analyze the dynamic effects of variables on real export volume. The empirical findings suggest that exchangerate stability has a significant positive effect on real export volume, both in the short and the long run.

scholarly journals Asymmetric Effects of Exchange Rate on Monetary Policy in Emerging Countries: A Non-Linear ARDL Approach in Uganda

2020 ◽  
Vol 7 (5) ◽  
pp. 24
Author(s):  
Allan Kayongo ◽  
Asumani Guloba ◽  
Joseph Muvawala
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Economic Uncertainty ◽  
Ardl Model ◽  
Real Money ◽  
Asymmetric Effects ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Exchange Rate Depreciation

Many money demand studies have been carried out on Uganda, however, these studies perceive and incorporate exchange rate as a linear determinant of real money demand. Indeed, exchange rate may have asymmetric effects on real money demand; with exchange rate appreciation having different effects from exchange rate depreciation. Therefore, this is the first study to estimate exchange rate asymmetries in Uganda, for the period 2008Q3 and 2018Q4. The study uses both the linear ARDL and non-linear ARDL methodologies to accomplish its goal. This is also done by incorporating an economic uncertainty index, which is critical, especially in light of the novel global coronavirus pandemic, that has disrupted trade, movement and supply chains. The error correction terms of both models are negative and significant, with the one of the non-linear ARDL twice as much as that of the linear ARDL. Indeed, the study confirms the existence of exchange rate asymmetries on Uganda’s real money demand. In the linear ARDL model, exchange rate has a positive effect in the long run but a negative result in the short run. On one hand, the non-linear ARDL model reveals that an exchange rate depreciation of the Uganda Shillings negatively affects real money demand in the short run. On the other hand, an exchange rate appreciation positively effects real money demand. Notably, economic uncertainty has insignificant effects in both models, except for its lags in the non-linear model. The implication of these findings is that macro-economic policy management in Uganda should be cognizant of these asymmetric effects of exchange rate, for effective planning, policy and implementation.

Financial Depth and Exchange Rate Volatility

2016 ◽  
Vol 62 (1) ◽  
pp. 19-30 ◽  
Author(s):  
Massomeh Hajilee ◽  
Omar M. Al Nasser
Keyword(s):  
Exchange Rate ◽  
Financial Market ◽  
Exchange Rate Volatility ◽  
Financial Deepening ◽  
Bounds Testing ◽  
Exchange Rate Uncertainty ◽  
Long Run ◽  
Financial Depth ◽  
Short Run ◽  
The Many

It is empirically well established that financial depth increases the power of the financial system and helps both government and the private sector to have access to adequate funds without a noticeable change in asset prices and exchange rates. Exchange rate uncertainty is considered one of the many factors that affect financial market performance. In this study, we try to determine the short-run and long-run effects of exchange rate volatility on financial depth in 26 selected countries, classified as developed, developing, and emerging economies over the period 1980-2011. Our findings indicate that exchange rate volatility has short-run and long-run effects in the majority of countries in this study. We found for 16 countries out of 26, financial depth responds significantly to exchange rate volatility (nine positive, seven negative). Furthermore, using the bounds testing approach shows that exchange rate volatility has significant impact on financial deepening in 20 out of 26 countries in the short run. The results show that despite similar classification and grouping, the estimated results could be very country specific depending on each country’s particular characteristics. We suggest that for every country, it is crucial to choose and implement appropriate financial market and exchange rate policies.

Asymmetric Exchange Rate Effects on Cross-Border Freight Flows between the United States and Canada

2020 ◽  
Vol 2674 (4) ◽  
pp. 348-361
Author(s):  
Junwook Chi
Keyword(s):  
Exchange Rate ◽  
Linear Models ◽  
Bilateral Trade ◽  
Nonlinear Models ◽  
Exchange Rate Volatility ◽  
The United States ◽  
Trade Flows ◽  
Asymmetric Effects ◽  
Cross Border ◽  
Long Run

This paper investigates possible asymmetric influences of the exchange rate on cross-border freight flows between the U.S.A. and Canada. Linear and nonlinear autoregressive distributed lag models are used to test for the existence of long-run asymmetric effects of 1) currency appreciation and depreciation and 2) exchange rate volatility changes on trade flows by truck, rail, air, vessel, and pipeline. This paper provides evidence that both currency value and exchange rate volatility affect the U.S.–Canada freight flows in an asymmetric manner. The long-run results of the nonlinear models show that exchange rate is found to be significantly associated with the bilateral trade flows between the U.S.A. and Canada. Exchange rate volatility tends to be significantly associated with trade flows in the nonlinear models, while its effects are insignificant in most cases in the linear models. These findings suggest that the conventional linear specification may mislead the asymmetric effects of exchange rate uncertainty on cross-border freight flows. It is also found that exchange rate sensitivities of U.S.–Canada trade flows by transport mode can differ significantly from those of aggregate trade flows. The information derived from disaggregate trade data can be useful for traders and shippers to develop a long-term strategic plan for infrastructure investment and service expansion.

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