scholarly journals A Predictive Effect of Exchange Rates on Value-Added Free Trade

2020 ◽  
Vol 12 (21) ◽  
pp. 9146
Author(s):  
Myoung Shik Choi
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Trade Balance ◽  
Value Added ◽  
Trade Flows ◽  
Currency Depreciation ◽  
Effective Exchange ◽  
The Exchange Rate ◽  
Positive Effect

The study investigates a predictive exchange rate effect on value-added trade flows on global value chains. We theoretically review the role of exchange rates on international trade based on insular, open, and global value chained economies. This paper empirically confirms a retro forecasting rule of the exchange rate on exports and trade balance using the value-added data for the period from 1995 to 2015. The first result is that real effective exchange rates have predictive elasticity information for the value-added trade flows. The second is that exchange rates have two practical effects on trade flows. The value-added exchange rate hurts the value-added trade balance due to increased intermediate trades, but the exchange rate has a positive effect on the gross trade balance. We would expect that value-added exports with trade balance can be improved in all sample countries when the value-added exchange rate is increasing. The main contribution is further evidence on distinguishing the currency depreciation on the value-added trade from the depreciation on the gross trade to achieve higher growth.

scholarly journals The Effects of the Exchange Rate on Value-Added International Trade to Enhance Free Trade Sustainability in GVCs

2019 ◽  
Vol 11 (10) ◽  
pp. 2740 ◽  
Author(s):  
Myoung Shik Choi ◽  
Bongsuk Sung ◽  
Woo-Yong Song
Keyword(s):  
International Trade ◽  
Exchange Rate ◽  
Free Trade ◽  
Bilateral Trade ◽  
Value Added ◽  
Policy Implications ◽  
Negative Effect ◽  
The Exchange Rate ◽  
Positive Effect

This study investigates the role of value-added bilateral trade focused on global value chains to achieve sustainable economic development. Our findings address trade policy implications that help to mitigate the global imbalances and exchange rate conflicts. These policies are expected to provide a competitive advantage that can be crucial to the sustainability of free trade. We apply traditional trade models to the value-added framework to examine the effects on value-added trade. Empirically, we investigate the bilateral value-added trade for recent years. Our major findings are that currency devaluation has a positive effect on value-added exports but has a negative effect on gross exports because of the effect on intermediate goods trading dominating the effect on international trade, i.e., the effect on foreign content of intermediate imports dominating the effect on the domestic content of exports. The same effect applies to imports. Also, we confirm that foreign income has a positive effect on exports and value-added exports, and domestic income has a positive effect on imports and value-added imports. However, their effects on trade balance are not consistent. Our major findings imply that the analysis of value-added trade can best contribute to the sustainability of global free trade by considering trade policies as a result of reflecting the easing of the global imbalance and the exchange rate war.

scholarly journals The Role of Exchange Rates in the Stock Price Development of Chemical Companies in the Visegrad Four Countries

2019 ◽  
Vol 22 (3) ◽  
pp. 117-129
Author(s):  
Jana Šimáková ◽  
Nikola Rusková
Keyword(s):  
Exchange Rate ◽  
Pharmaceutical Industry ◽  
Exchange Rates ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Exchanges ◽  
The Exchange Rate ◽  
Chemical Companies ◽  
The Empirical Analysis

The aim of the paper is to evaluate the effect of exchange rates on the stock prices of companies in the chemical industry listed on the stock exchanges in the Visegrad Four countries. The empirical analysis was performed from September 2003 to June 2016 on companies from the petrochemical and pharmaceutical industry. The effect of the exchange rate on stock prices is analyzed using Jorion’s approach on monthly data. In contrast to the selected petrochemical companies, the pharmaceutical companies did not use any hedging instruments in the tested period. The effect of the exchange rate on the stock price was proved only in the case of companies from the pharmaceutical industry. This suggests that exchange rate risk could be eliminated by using hedging instruments.

scholarly journals PENGARUH VARIABEL MAKRO EKONOMI TERHADAP PERTUMBUHAN EKONOMI INDONESIA TAHUN 2015-2019

2021 ◽  
Vol 2 (2) ◽  
pp. 88-99
Author(s):  
Feby Kinanda
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Unemployment Rate ◽  
Trade Balance ◽  
Inflation Rate ◽  
Short Term ◽  
Negative Effect ◽  
The Exchange Rate ◽  
Positive Effect

This study aims to analyze the effect of macroeconomic variables including the open unemployment rate, trade balance, inflation rate and the rupiah exchange rate against the dollar on Indonesian economic growth by using the ECM error correction model approach to see the long-term and short-term relationships that influence macro variables on economic growth. , in the long term the open unemployment rate variable, the trade balance, the inflation rate have a negative effect while the exchange rate has a positive effect, while in the short term the open unemployment rate, the inflation rate and the exchange rate have a negative effect while the trade balance has a positive effect.   Keywords: Economic Growth, Open Unemployment Rate, Trade Balance, Inflation, Exchange Rate

Nonlinear ARDL approach, asymmetric effects and the J-curve

2015 ◽  
Vol 42 (3) ◽  
pp. 519-530 ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Hadise Fariditavana
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Trade Flows ◽  
Balance Model ◽  
Content Type ◽  
Asymmetric Effects ◽  
Currency Depreciation ◽  
Nonlinear Ardl ◽  
J Curve ◽  
Ardl Approach

Purpose – Previous research that investigated the effects of currency depreciation on the trade balance assumed that the adjustment of all variables in a given model is in linear fashion. The authors wonder if introduction of nonlinearity in the adjustment of some variables such as the exchange rate can shed additional light on evidence of the J-curve. The new approach also allows to test whether exchange rate changes have symmetric or asymmetric effects on the trade balance. Estimates of a trade balance model for Canada, China, Japan, and the USA reveal that the effects are indeed asymmetric. The paper aims to discuss these issues. Design/methodology/approach – The methodology is based on linear and nonlinear ARDL approach. Findings – When nonlinearity is introduced into testing approach for the J-curve, more evidence is found in support of the J-curve. Research limitations/implications – The models are estimated using aggregate trade flows of each country with the rest of the world, hence they suffer from aggregation bias. Using trade flows at bilateral level and at commodity level are highly recommended for future research. Originality/value – This is the first paper that applies nonlinear ARDL approach to test the short-run and long-run effects of currency depreciation on the trade balance.

The Relation between National Stock Prices and Effective Exchange Rates: Does It Affect Exchange Rate Exposure?

2015 ◽  
Vol 15 (2) ◽  
pp. 241-256 ◽  
Author(s):  
Marko Korhonen
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Exchange Rates ◽  
Stock Prices ◽  
Risk Sharing ◽  
International Risk Sharing ◽  
Exchange Rate Exposure ◽  
Effective Exchange ◽  
The Exchange Rate ◽  
Cointegration Relationship

There is twofold contribution in this paper. First, by using monthly data for 16 industrialized countries for the period 1973–2011 we find evidence of time-varying cointegration relationship between effective exchange rates and national stock market indices. Second, we present that the cointegration relationship affects exchange rate exposure. We propose that the exchange rate exposure effect changes when the connection between the exchange rate and stock market emerges. This is a new result and reflects importance of these markets’ joint role in international risk sharing.

scholarly journals Inventories of Asian textile producers, US cotton exports, and the exchange rate

2014 ◽  
Vol 61 (4) ◽  
pp. 397-413
Author(s):  
Nazif Durmaz
Keyword(s):  
Exchange Rate ◽  
South Korea ◽  
Exchange Rates ◽  
Relative Prices ◽  
Negative Effect ◽  
The Exchange Rate ◽  
Inventory Dynamics ◽  
Market Changes

The present paper develops a model with US cotton exports depending on the stock-to-use ratio, trade weighted exchange rates, and the relative cotton prices. The role of inventories in cotton consumption is examined in five textile producing cotton importers, China, Indonesia, Thailand, South Korea, and Taiwan. Cotton inventory dynamics is diverse among Asian textile producers. Relative prices have negative effect in all markets as expected. Exchange rate elasticities show that effects should be examined for each separate market. Changes in rates of depreciation also have stronger effects than exchange rate. Results reveal that these countries are not all that homogenous.

scholarly journals Estimation Of The Marshall-Lerner Condition For Namibia

2013 ◽  
Vol 12 (5) ◽  
pp. 511 ◽  
Author(s):  
Joel Hinaunye Eita
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Trade Balance ◽  
Vector Autoregression ◽  
Balance Of Payments ◽  
Trade Elasticities ◽  
World Income ◽  
The Exchange Rate ◽  
The Impact ◽  
Positive Effect

According to the Marshall-Lerner condition, the sum of trade elasticities should be greater than one for a change in exchange rate to have an impact on the countrys balance of payments. This paper applies cointegrated vector autoregression to empirically estimate the Marshall-Lerner condition in Namibia. The main purpose is to test the impact of change in exchange rate on the trade balance. The paper investigates if trade elasticities are high enough in order to justify a change in exchange rate as an appropriate policy to improve the trade balance of the balance payments. The results indicate that world income has a positive effect on exports, while real exchange rate appreciation discourages exports. Imports respond positively to both domestic income and real exchange rate appreciation. The results indicate that imports and exports respond significantly to a change in the exchange rate and suggest that Marshall-Lerner condition holds for Namibia.

scholarly journals Global value chains and the exchange rate elasticity of exports

2016 ◽  
Vol 17 (1) ◽  
Author(s):  
Swarnali Ahmed ◽  
Maximiliano Appendino ◽  
Michele Ruta
Keyword(s):  
Exchange Rate ◽  
Global Value Chains ◽  
Real Effective Exchange Rate ◽  
Value Chains ◽  
Currency Depreciation ◽  
Final Good ◽  
Effective Exchange ◽  
The Exchange Rate ◽  
Effective Exchange Rate ◽  
Over Time

AbstractThis paper analyzes how the formation of global value chains (GVCs) has affected the exchange rate elasticity of exports. Using a panel framework covering 46 countries over the period 1996–2012, we first find some suggestive evidence that the elasticity of real manufacturing exports to the real effective exchange rate (REER) has decreased over time. We then examine whether the formation of supply chains has affected this elasticity using different measures of GVC integration. Intuitively, as countries are more integrated in global production processes, a currency depreciation only improves competitiveness of a fraction of the value of final good exports. In line with this intuition, we find evidence that GVC participation reduces the REER elasticity of manufacturing exports by 22 percent, on average.

scholarly journals PENGARUH PDB, INFLASI, KURS DAN TINGKAT SUKU BUNGA TERHADAP NERACA PERDAGANGAN INDONESIA

2021 ◽  
Vol 16 (2) ◽  
Author(s):  
Ilham Tri Murdo ◽  
Junaidi Affan
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Empirical Evidence ◽  
Trade Balance ◽  
Quantitative Research ◽  
Insignificant Effect ◽  
Independent Variable ◽  
The Exchange Rate

Abstract   This study is to determine the extent to which the independent variable factors (GDP, Inflation, Exchange and Interest Rates) affect the dependent variable (Trade Balance) in the last 20 years. Quantitative research aims to obtain empirical evidence regarding the effect of the variables of GDP, Inflation, Exchange Rates and Interest Rates on the Trade Balance, and also to test hypotheses to strengthen or even reject the hypothesis. With the following results: GDP has a negative and insignificant effect on the Trade Balance, Inflation has a negative and significant effect on the Trade Balance, the Exchange Rate has no and no significant effect on the Trade Balance, Interest Rates have no and no significant effect on the Trade Balance and GDP, INflation , Exchange and Interest Rates together (simultaneously) have a significant and significant effect on the Trade Balance

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

2016 ◽  
Vol 8 (4) ◽  
pp. 8 ◽  
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

<p>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.</p><strong></strong>

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