New Evidence on Exchange-Rate Volatility and Export Flows in Thailand: Nonlinearity and Asymmetric ARDL Investigation

Arize, Augustine C.; Ogunc, Asli; Kalu, Ebere Ume; Malindretos, John

doi:10.1080/08853908.2020.1799886

Cited by 8 publications

(4 citation statements)

References 37 publications

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“…As noted in previous studies on Indonesia’s trade (Hegerty, 2016; Pino et al , 2016), depreciation of the IDR may be detrimental to exports from Indonesia as the currency could change global prices for those commodities or spur anxiety among traders (Fang et al , 2006). For instance, export promotion policies through IDR depreciation require stability to be effective (Arize et al , 2021; Fang et al , 2009).…”

Section: Resultsmentioning

confidence: 99%

“…Besides, as noted by Bahmani-Oskooee and Fariditavana (2016), real depreciation of currencies is more likely to stem from changes in traders’ behaviour than appreciation. Furthermore, due to rigidity of prices, export and import prices may respond asymmetrically to exchange rate movements (Arize et al , 2021).…”

Section: Resultsmentioning

confidence: 99%

“…Although models to estimate trade flows under asymmetric effects can include a substantial number of factors, such structural models can be complex (Koutmos and Martin, 2003). As such, most studies looking into export and import demand models use reduced forms (Arize et al , 2021; Bahmani-Oskooee and Aftab, 2017; Bailey et al , 1987; Fang et al , 2009). Bilateral export flows (EX) can be expressed as a function of real income of foreign partner, real bilateral exchange rate (relative prices) and ERV (exchange rate uncertainty).…”

Section: Methodsmentioning

confidence: 99%

“…The variable for DCOV covers 2020_Q1 to 2020_Q4. Earlier studies introduced dummy variables for the GFC period, a period of great volatility and change in global demands for exports (Arize et al , 2021; Bahmani-Oskooee and Nouira, 2020; Iyke and Ho, 2019).…”

Section: Methodsmentioning

confidence: 99%

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Exchange rate volatility and trade flows in Indonesia and ten main trade partners: asymmetric effects

Heriqbaldi

Esquivias

Handoyo

et al. 2022

SEF

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Purpose This paper aims to examine whether Indonesian cross-border trade responds asymmetrically to exchange rate volatility (ERV). Design/methodology/approach An exponential generalized autorgressive conditional heteroscedasticity model is applied to estimate the ERV of Indonesia and ten main trade partners using quarterly data from 2006 to 2020. A nonlinear autoregressive distributed lag estimation is applied to estimate the impact of ERV on cross-border trade. Impacts from the global financial crisis (GFC) of 2008 and the COVID-19 pandemic are covered. Dynamic panel data is used for the robustness test. Findings In the short-run, ERV significantly affects exports to most of the top partners (positively, negatively or both). In the long run, asymmetric effects occur in Indonesia’s exports to five top destinations. The weakening of the Indonesian Rupiah mainly supports exports in the short term. Imports from top partners are also affected by ERV in both the short run and, to a lesser extent, in the long run. Both the GFC and the COVID-19 pandemic reduced trade: for most cases, in the short run. The dynamic panel model suggests that ERV has asymmetric impact on cross-border trade in the long run. Practical implications Exchange rate strategies need to avoid a single-side policy approach and, instead, account for exporter and importer differences in risk behaviour and an asymmetric response to ERV in trade. Policymakers need to consider policies that stabilise the currency. Originality/value This study provides evidence that cross-border trade can react asymmetrically to the exchange rate uncertainty and that the impacts of real ERV are asymmetric as well. The authors also apply a dynamic panel that signals that ERV matters in the long run for Indonesian trade with top partners.

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