Differential Impacts of Exchange Rate Fluctuations on Trade Balance and Economic Output
Year: 2024
Type: article
Abstract: This study investigates the asymmetric influences of exchange rate fluctuations on trade performance and economic growth within eight of ASEAN's largest economies over a comprehensive period spanning from 1970 to 2019. Employing the non-linear autoregressive distributed lag (NARDL) methodology, the empirical analysis confirms a long-term equilibrium relationship among exchange rates, trade dynamics, and output trajectories. The findings reveal distinct short-term and long-term responses to currency movements across countries. While ASEAN experienced short-term trade and output boosts from both currency appreciation and depreciation, Singapore witnessed the opposite. Indonesia and Malaysia exhibited improved short-term trade and growth following currency appreciation, but long-term trends favored depreciation. Cambodia and Vietnam displayed similar patterns, except for a marginally negative short-term trade impact from currency depreciation. Overall, the study indicates that both currency appreciation and depreciation have adverse effects on long-term trade balances across most ASEAN nations, although depreciation often stimulates short-term trade. Similarly, currency depreciation tends to positively influence short-term growth, whereas appreciation generally has a negative impact. Based on these results, the study concludes with policy recommendations tailored to the continent's specific economic conditions.
Authors: Raden Parianom, Kery Utami, Siti Hidayati
Institution: Universitas Pembangunan Nasional Veteran Jakarta
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W6892987259
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