Exchange Rate Volatility and Intra‐Asia Trade: Evidence by Type of Goods

Tang, Hsiao Chink

doi:10.1111/twec.12095

Cited by 31 publications

(23 citation statements)

References 33 publications

(46 reference statements)

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“…Recent empirical studies, however, have found that the exchange rate volatility has significantly negative effect on intra‐Asian trade (e.g. Thorbecke, ; Hayakawa and Kimura, ; Chit et al ., ; and Tang, ). These studies focused on a particular industry (electronic components in Thorbecke, ), and the difference between final and intermediate goods (Hayakawa and Kimura, ; and Tang, ).…”

Section: Introductionmentioning

confidence: 96%

Industry‐specific exchange rate volatility and intermediate goods trade in Asia

Sato

Shimizu

Shrestha

et al. 2016

Scottish J Political Eco

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This paper empirically analyzes the effect of exchange rate volatility on intra-Asian trade of intermediate goods at an industry level by constructing a new dataset of the industry-specific bilateral real exchange rate. As the final processed exports are destined for countries outside the Asian region, both the exchange rate and world demand are considered as a possible driving force in the cross-border fragmentation and processing trade. It is found that, in contrast to the recent studies, the exchange rate impact on intra-regional trade differs across industries. The exchange rate volatility has negative and significant effects only on the general machinery industry and a part of the electric machinery industry with more differentiated products, even when taking into account the world's demand for the final processed exports. These findings are supported by various kinds of exchange rate volatility in the short-and long-run. Our empirical results suggest that the different impact of the exchange rate volatility across industries is tied to the characteristics of traded goods in respective industries.

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Section: Introductionmentioning

confidence: 96%

Industry‐specific exchange rate volatility and intermediate goods trade in Asia

Sato

Shimizu

Shrestha

et al. 2016

Scottish J Political Eco

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“…The positive effects of volatility on bilateral trade flows were apparent between USA and Brazil in various industries (Bahmani-Oskooee, Harvey and Hegerty, 2013). Likewise, the favourable effects of exchange rate volatility were also found on trade flows among the countries in South Asia (Tang, 2014). Nonetheless, while the positive impact of volatility presented on trade of machinery and transport equipment between Japan and USA, it showed mixed results on chemicals products and miscellaneous manufactured articles (Bahmani-Oskooee and Hegerty, 2008).…”

Section: Studies In General Casesmentioning

confidence: 99%

The Impact of Exchange Rate Volatility on Korea-Japan Trade Flows: An Industry Level Analysis

Uprasen¹,

Zolin²

2017

Korea Int Trade Res Inst

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The existing literature, in both theoretical and empirical viewpoints, indicates that there is no consensus regarding the effects of exchange rate volatility on bilateral trade flows. It can show the different effects across countries and industries. This article examines impact of volatility of exchange rate on 57 importing and 69 exporting industries of Korea vis-à-vis Japan. The study is conducted by employing disaggregated trade data (3-digit level of SITC product) to avoid the aggregation bias problem. The autoregressive distributed lag (ARDL) cointegration model is adopted in the empirical estimation, using annual data during 1970 to 2016. The findings indicate that the exchange rate volatility affects bilateral trade flows between Korea and Japan in both short run and long run. Nevertheless, the majority of industries are unaffected in the long run. The number of negatively affected industries are remarkably higher than the positively affected ones in both exporting and importing products. The machinery and transport equipment (SITC7) are the most negatively affected commodities of both importing and exporting products. While the effects of income on bilateral trade flows are in line with the theoretical prediction, the majority of industries are not affected by the real exchange rate in the long run.

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“…6 As can be seen in Figure 2, the share of currencies invoiced in 5 For recent estimates of the weights of the dollar in East Asian countries' hypothetical currency baskets see Henning (2012). 6 Empirical analysis by Hayakawa and Kimura (2008), Volz (2010), Tang (2011) and Thorbecke (2011) shows that exchange rate volatility has negative effects on intra-regional trade in the East Asian region, and that volatile exports of Asian and Pacific countries (excluding Japan) has been constantly above 80 percent, that is, a very large share of the trade within the regional trade-production network is being conducted in dollar.…”

Section: The Dollar's Role In East Asiamentioning

confidence: 99%

RMB Internationalisation and Currency Cooperation in East Asia

Volz

2014

Financial and Monetary Policy Studies

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This paper scrutinises the state of RMB internationalisation and its likely progress over the coming years and discusses its implications for currency co-operation in East Asia. As part of its internationalisation, the RMB is gradually delinked from the dollar, which will effectively put an end to the East Asian dollar standard that has shaped the region's financial architecture over the last three decades and that has provided a relatively high degree of intra-regional exchange rate stability. Because of the close trade and investment ties that have developed across the region, the East Asian countries, especially the ASEAN countries which are striving to create an ASEAN Economic Community, will continue to manage their exchange rates and stabilise their currencies against one another to facilitate cross-border investment and commerce. But instead of a replacing of the dollar standard with an RMB standard we are likely to see some rather loose and informal exchange rate co-operation in East Asia based on currency baskets, with China herself moving towards a managed exchange rate system guided by a currency basket.JEL classification: E58, F33.

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Exchange Rate Volatility and Intra‐Asia Trade: Evidence by Type of Goods

Cited by 31 publications

References 33 publications

Industry‐specific exchange rate volatility and intermediate goods trade in Asia

Industry‐specific exchange rate volatility and intermediate goods trade in Asia

The Impact of Exchange Rate Volatility on Korea-Japan Trade Flows: An Industry Level Analysis

RMB Internationalisation and Currency Cooperation in East Asia

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