Export Analysis: Authority of Inflation and Exchange Rate in Asean-8

Abstract

This study was aimed to analyze the relationship of long-term and short-term equilibrium between exchange rates and inflation on exports in ASEAN-8 countries (Brunei Darussalam, Laos, Indonesia, Malaysia, Singapore, Philippines, Vietnam and Thailand) by using analysis model with the Autoregressive Distributed Lag (ARDL) panel from the period 1990 to 2017. The model selection was based on long-term and short-term capabilities with different stationary levels. The results revealed that in long-term the exchange rate and inflation had a dominant influence on export activities in ASEAN-8 countries, while inflation had a dominant influence on exports in short-term. This result proved that inflation had a large influence on the growth of the trade stability, if the cost of products and services continuously increased in the market mechanism, it will result in the increased public consumption. The excess liquidity in the market triggered the consumption or speculation which resulted in the non-compliance products distribution and the decline in currency value continuously.

The Nexus of International Trade and Inflation on ASEAN-5 Countries’ Economic Growth: The Mediating Role of Exchange Rates

“…Exports activity strongly influence the economic growth positively directly (coefficient: 4.21E-07), and became one of the most important determinant factors of economic growth (Y=C+I+G+(X-M). This finding is in line with the previous study revealed that export in goods and services by ASEAN countries, especially the "five" one will expand their international market and production capacity which in turn will lead to the increase of foreign direct investment, job creation, and finally GDP per capita [6], [10], [15], [18]. ASEAN commitment to always reduce trade barriers and improve investment conducive for the last 53 years has been successful to boost export activity and economic growth and it should be improved as fast as possible.…”

“…It is also can influence economic growth by mediated by the exchange rate. Popular thought said that inflation is always negatively affecting the economy of a country and this study just strengthened the theory [6], [16], [32], [33]. Moderate and high inflation make the prices of many products in the market increase lowering the purchasing power of the people.…”

“…It could be explained by exogenous variables outside our model. It is very possible that export activities will not always have a significant positive effect on the exchange rate, because the dollars earned from trading transaction activities with international partners are kept in foreign banks, or used by business owners in the ASEAN-5 countries to pay their international obligations [30], [4], [6], [29]. To anticipate this concern, ASEAN-5 countries should arrange the agreement for their businessman to keep their dollars earned from international trade transactions inside the country for a certain period to be utilized then they can use it after.…”

“…However, the theory of economic growth in the decade arises because of social change in society, especially in developing countries, which experts put forward to improve socio-economic conditions in emerging nations. Many studies examined the economic growth in developing countries, including ASEAN-5 [6], [10], [14]- [16]. Several factors affect economic growth.…”

“…After all, no country in the world can meet its own needs. So, it is necessary to exchange goods and services between two or more countries through export and import activities [6]. International trade affects the economic growth of countries.…”