Chan, Tze-Haw and Hooy, Chee-Wooi (2011): China-Malaysia’s long run trading and exchange rate: complementary or conflicting?
Download (193Kb) | Preview
This paper examines the long run dynamics of exchange rate and bilateral export-import flows between China and Malaysia. Our analysis contributed in using high frequency monthly data for the recent period from January 1990 to January 2008, based on the Autoregressive Distributed Lag bound testing procedure, the fully modified OLS, dynamic OLS and rolling estimations, as well as the generalised impulse response (IRF) and variance decomposition (VDC) analyses. Our empirical findings reveal that the Marshall-Lerner condition holds in the long run but the export-import demands do not adhere to the J-curve pattern. And, expansionary effect is of greater evidence for Malaysia due to real exchange shocks but inconclusive for China. More important, the VDC results imply that China-Malaysia trade is along the sustainable path. In brief, the study supports for the complementary role of China instead of conflicting (competing) features in the China-Malaysia bilateral trading
|Item Type:||MPRA Paper|
|Original Title:||China-Malaysia’s long run trading and exchange rate: complementary or conflicting?|
|English Title:||China-Malaysia’s long run trading and exchange rate: complementary or conflicting?|
|Keywords:||Exchange rates, J-curve, Marshall-Lerner Condition, ARDL Bound Test, Rolling, FMOLS, DOLS|
|Subjects:||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F42 - International Policy Coordination and Transmission
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Tze-Haw Chan|
|Date Deposited:||21. Sep 2011 11:32|
|Last Modified:||12. Feb 2013 05:39|
Ahmad, J. and J. Yang (2004) Estimation of the J-Curve in China. East–West Center Working Papers No. 67.
Ahmed, S., C. J. Gust, S. B. Kamin, and J. Huntley. (2002) Are Depreciations as Contractionary as Devaluations? A Comparison of Selected Emerging and Industrial Economies. International Finance Discussion Paper, No. 737, Board of Governors of the Federal Reserve System, Washington, D.C.
Backus, D. K., Kehoe, P.J. and Kydland, F.E. (1994) Dynamics o f the Trade Balance and the Terms of Trade: the J-Curve? American Economic Review, 84, 84-103.
Baharumshah, A. Z. (2001) The Effect of Exchange Rate on Bilateral Trade Balance: New Evidence from Malaysia and Thailand. Asian Economic Journal, 15 (3), 291-312.
Bahmani-Oskooee, M and Miteza (2003) Are Devaluations Expansionary or Contractionary? A Survey Article. Economic Issues, 8 (2), 1-28.
Bahmani-Oskooee, M. and H. Harvey (2006) How Sensitive Are Malaysia’s Bilateral Trade Flows to Depreciation? Applied Economics, 38, 1279-1286.
Bahmani-Oskooee, M. and H. Harvey (2010) The J-curve: Malaysia versus her major Trading Partners. Applied Economics, 42, 1067-1076.
Bahmani-Oskooee, M and Y. Wang (2006) The J Curve: China Versus Her Trading Partners. Bulletin of Economic Research, 58 (4), 323-343.
Bahmani-Oskooee, M and A. Ratha (2007) Bilateral S-curve between Japan and her trading partners. Japan and the word Economy, 19 (2007) 483–489.
Calvo, Guillermo A. and Carmen M. Reinhart (2001) When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options. Working Paper
Dornbusch, R. and P. Krugman (1976) Flexible Exchange Rates in the Short Run. Brookings Papers on Economic Activity, 3.
Duarte, A and K. Holden (2001) The Business Cycle in the G7 Economies. Centre for International Banking, Economics and Finance, Working Paper, Liverpool John Moores University.
Eichengreen, B. and R. Hausmann (1999) Exchange Rates and Financial Fragility. NBER Working Papers 7418, National Bureau of Economic Research.
Helkie, W.L. and P. Hooper (1987) The U.S. External Deficit in the 1980s. International Finance Discussion Paper No. 304, Board of Governors, Federal Reserve System, Washington, D.C.
Krugman, P. and R. E. Baldwin (1987) The Persistence of the U.S. Trade Deficit. Brookings Papers on Economic Activity, 1, 1-43.
Lerner, A. (1944) The Economics of Control, New York: Macmillan.
Marshall, A. (1923) Money, Credit and Commerce, London: Macmillan and Co.
Marwah, K. and Klein, L.R. (1996) Estimation of J -curves: United States and Canada. Canadian Journal of Economics, 29, 523-539.
Masih, A.M.M. and Masih, R. (1999) Are Asian stock market fluctuations due mainly to intra-regional contagion effects? Evidence based on Asian emerging stock markets. Pacific-Basin Finance Journal, 7, 251–282.
Onafowora, O. (2003) Exchange rate and trade balance in East Asia: is there a J-curve? Economics Bulletin, 5 (18), 1-13.
Pesaran, M.H., Y. Shin, and R.J. Smith (1996) Testing for the Existence of a Long-Run Relationship. DAE Working Paper No. 9622, Department of Applied Economics, University of Cambridge.
Pesaran, M.H., Shin, Y. and Smith, R. J. (2001) Bound Testing Approaches to the Analysis of Level Relationship. Journal of Applied Econometrics, 16, 289-326.
Phillips, P. C. B. and B. E. Hansen (1990) Statistical inference in instrumental variables regressions with 1(1) processes. Review of Economic Studies, 57, 99-125.
Rajan, R.S. and C-H Shen (2002) Are Crisis-Induced Devaluations Contractionary? Pacific Basin Working Paper Series 02-06, Federal Reserve Bank of San Francisco.
Rose, A.K., Yellen, J.L. (1989) Is there a J-curve? Journal of Monetary Economics, 24 (July), 53–68.
Shi, J. (2006) Are Currency Appreciations Expansionary in China? NBER Working Paper No. W12551.
Stock, J.H. and Watson, M. (1993) A simple estimator of cointegrating vectors in higher Order integrated systems. Econometrica 61, 783–820.
Stucka, T. (2004) The Effects of Exchange Rate Change on the Trade Balance in Croatia. IMF Working Papers 04/65, International Monetary Fund.
Zhang, Y. and G.-H. Wan (2007) What Accounts for China’s Trade Balance Dynamics? Journal of Policy Modeling, 29, 821–83.
Zhang, Z. (1998) Does devaluation of the Renminbi Improve China’s Balance of Trade? Economia Internazionale, 51(3), 437–45.
Zhang, Z. (1999) China’s Exchange Rate Reform and Its Impact on the Balance of Trade and Domestic Inflation. Asia Pacific Journal of Economics and Business, 3(2), 4–22.