Exchange Rate Policy and Export Performance in Efficiency-Driven Economies

Abstract

Increased globalisation of trade has led a growing number of firms to search beyond their traditional domestic markets. As a result, export-led growth has gained focus, particularly amongst industrialising nations, or so-called efficiencydriven economies, in search of economic growth. Policy prescriptions have generally proposed a weakening of the exchange rate as a means to stimulate exports; whilst an exchange rate appreciation would be detrimental to exports and encourage imports. Past research on this topic has been mixed.This research examines the impact of exchange rate on export performance in a sample of nine efficiency-driven economies for the period from 1990 to 2009. These economies, with floating exchange rate arrangements, include Brazil, the Dominican Republic, Malaysia, Mauritius, Mexico, Peru, South Africa, Thailand and Turkey. Panel data models using a fixed-effects method have been applied in this research. The research finds that a weakening of the exchange rate does not necessarily improve export performance. To the contrary, export growth is associated with a stronger, relative exchange rate. The lag effect of exchange rate movement on export performance is slightly more pronounced, but remains statistically insignificant.

How Do Trade Margins Respond to Exchange Rate? The Case of Egypt1

“…Although a number of studies (e.g., Genc and Artar, 2014;Bahmani-Oskooee and Ardalani, 2006) have endorsed a favorable relationship between exchange rate devaluations and export performance, other studies have pointed to the limited changes in export performance following exchange rate movements in some economies. Rowbotham et al (2014) examined this relationship for a sample of nine efficiency-driven economies, all of which had floating exchange rate regimes, for the period 1990-2009. Using panel data models and fixed effects, their results showed that a weaker exchange rate does not necessarily improve export performance.…”

“…The literature on exchange rate and exports is abundant and inconclusive. At the macroeconomic level, while several studies have endorsed a favorable relationship between exchange rate devaluations and export performance (Genc and Artar, 2014;Bahmani-Oskooee and Ardalani, 2006), others have pointed to the limited changes in export performance following exchange rate movements in some economies (Rowbotham et al, 2014;Loto, 2011). Across Middle East and North African (MENA) countries, studies tend to rely mainly on aggregate data rather than firm-level data (El-Ramly, 2008;Bahmani-Oskooe and Kandil, 2009;Nouira et al, 2011;Bahmani-Oskooee et al, 2015a).…”

Untitled

“…Schaling [23] argues that South Africa's monetary authorities should be interested in targeting competitiveness via the RER which is also correct technique to narrow the present inflation targeting band. Raddats, Schaling & Kabundi, Matlasedi, Ilorah, & Zhanje, and Rowbothan, Saville, & Mbululu [24][25][26], confirmed that exchange rate has a positive effect on South African exports. While, Sekantsi [27], Muzenda, Chamunorw & Choga, Chiloane, and Khosa confirmed a negative effect.…”

Manufacturing Export Performance: A Trend Analysis Approach

“…Ref. [11] assessed exchange rate policy and export performance in efficiency driven economy uses fixed effects method and panel data model concluded that a weakening of the exchange rate does not necessarily improve export performance. Also export growth seems to be associated with stronger exchange rates.…”