Is Currency Depreciation Always Good for Improving Trade Balance? An Empirical Analysis of Selected Asian Economies

Alemu, Aye Mengistu; Lee, Jin-Sang

doi:10.17010/ijf/2014/v8i7/71903

Cited by 2 publications

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“…The results are in line with research by Alemu and Lee (2014) who investigated finding no evidence of the impact of depreciation that increases exports. This REER calculation does not consider the global production chain which has stages of production with components from various countries.…”

Section: Overall Reviewsupporting

confidence: 92%

Export Determinants of RCEP Negotiating Countries: Does REER Matter?

Susilo,

Ramadhan

2024

welf.

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With the use of panel data analysis, this study seeks to determine how the Real Effective Exchange Rate (REER) affects the overall exports from the ASEAN-5 nations (Indonesia, Singapore, Malaysia, Thailand, and the Philippines) as well as several neighboring nations (Australia, India, Japan, South Korea, New Zealand, and China). An increase in a country's REER indicates a weakening of the country's trade competitiveness, assuming the other variables remain (ceteris paribus). Based on the results of the study, it was found that the effect of REER was different for ASEAN-5 and non-ASEAN and did not significantly affect the total exports of the 11 countries. The REER coefficient is positive for non-ASEAN countries and the value is higher for high-income countries. The REER coefficient is negative for ASEAN-5 countries but not significant. The negative value is more significant for middle-income countries. The effect of REER on total exports can depend on the type of commodity traded in a country (using natural resources that are abundant in the country or not). Export products that rely on imported raw materials cause when depreciation occurs, the price of raw materials becomes more expensive, increases the price of the final product, and also decreases the terms of trade of related products.Dengan menggunakan analisis data panel, penelitian ini bertujuan untuk mengetahui bagaimana Real Effective Exchange Rate (REER) mempengaruhi keseluruhan ekspor dari negara-negara ASEAN-5 (Indonesia, Singapura, Malaysia, Thailand, dan Filipina) serta beberapa negara tetangga (Australia, India, Jepang, Korea Selatan, Selandia Baru, dan Tiongkok). Peningkatan REER suatu negara mengindikasikan melemahnya daya saing perdagangan negara tersebut, dengan asumsi variabel lain tetap (ceteris paribus). Berdasarkan hasil penelitian diketahui bahwa pengaruh REER berbeda untuk ASEAN-5 dan non-ASEAN dan tidak berpengaruh signifikan terhadap total ekspor 11 negara tersebut. Koefisien REER positif untuk negara non-ASEAN dan nilainya lebih tinggi untuk negara berpenghasilan tinggi. Koefisien REER negatif untuk negara-negara ASEAN-5 tetapi tidak signifikan. Nilai negatifnya lebih besar dan signifikan untuk negara berpenghasilan menengah. Pengaruh REER terhadap total ekspor dapat bergantung pada jenis komoditas yang diperdagangkan di suatu negara (menggunakan sumber daya alam yang melimpah di negara tersebut atau tidak). Produksi barang ekspor dengan bahan baku impor menyebabkan ketika terjadi depresiasi, harga bahan baku menjadi lebih mahal, menaikkan harga produk akhir, sehingga menurunkan terms of trade produk terkait.

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Section: Overall Reviewsupporting

confidence: 92%

Export Determinants of RCEP Negotiating Countries: Does REER Matter?

Susilo,

Ramadhan

2024

welf.

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“…The authors mentioned that, in the long run, India's trade balance benefits from rupee depreciation. Alemu and Lee (2014) examined the impact of depreciation on the trade balances of 14 Asian economies and concluded that there is no evidence that depreciation improves trade balances. Nevertheless, when they restricted the analysis to eight Asian countries with relatively large, industrialized, and stable economies, they found that depreciation improved the trade balance of the second group of countries.…”

Section: Literature Review and Contribution Of The Researchmentioning

confidence: 99%

The Nexus between Usd Parity and Trade Balance of BRICS-T Countries

Çeti̇n

SÜRMEN

2022

Eskişehir Osmangazi Üniversitesi İktisadi Ve İdari Bilimler Dergisi

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Unlike many previous studies that focused on the link between trade balance and exchange rate parities through time series models, panel data models were applied mainly to BRICS-T countries. Comparative variances of trade balances against USD/local currency parity were revealed, and the most sensitive countries were Brazil, Turkey, and Russia. According to the panel EGLS analysis, the same parity had a non-significant negative impact on the trade balance in the short run. A significant long-term effect was found in the FMOLS analysis. Panel VAR and VECM generalized impulse response analysis revealed the negative impact of the USD/domestic currency parity on the trade balance of BRICS-T. The J-curve was observed briefly in the analyses.

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Is Currency Depreciation Always Good for Improving Trade Balance? An Empirical Analysis of Selected Asian Economies

Cited by 2 publications

References 0 publications

Export Determinants of RCEP Negotiating Countries: Does REER Matter?

Export Determinants of RCEP Negotiating Countries: Does REER Matter?

The Nexus between Usd Parity and Trade Balance of BRICS-T Countries

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