Do Inpayments and Outpayments Respond to Exchange Rate Changes Asymmetrically? Evidence from Malaysia

BAHMANI-OSKOOEE, Mohsen and Harvey, Hanafiah (2017): Do Inpayments and Outpayments Respond to Exchange Rate Changes Asymmetrically? Evidence from Malaysia.

Abstract

Since pass-through of exchange rate changes on import and export prices are asymmetric, we expect a country’s inpayments (export earnings) and outpayments (cost of imports) to react to exchange rate changes asymmetrically too. We demonstrate this hypothesis by considering trade between Malaysia and each of her 11 largest trading partners. We find that while the short-run effects of exchange rate changes on Malaysia’s inpayments and outpayments are asymmetric with all partners, the long-run asymmetric effects are present in less than half of the partners. The results are partner-specific.

• Item Type: MPRA Paper
• Language: English
• Keywords: Malaysia, Trading Partners, Inpayments, Outpayments, Exchange Rate, Asymmetry Analysis
• Subjects: F - International Economics > F3 - International Finance; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

References

Aftab, M., Ahmad, R., Ismail, I. and Ahmed, M. (2017), “Exchange Rate Volatility and Malaysian-Thai Bilateral Industry Trade Flows”, Journal of Economic Studies, 44, 99-114.

Al-Shayeb, A. and A. Hatemi-J., (2016) "Trade openness and economic development in the UAE: an asymmetric approach", Journal of Economic Studies, Vol. 43, pp.587-597.

Arize, A. C., J. Malindretos, and E.U. Igwe, (2017), “Do Exchange Rate Changes Improve the Trade Balance: An Asymmetric Nonlinear Cointegration Approach”, International Review of Economics and Finance, Vol. 49, pp. 313-326.

Baghestani, H. and S. Kherfi, (2015) "An error-correction modeling of US consumer spending: are there asymmetries?", Journal of Economic Studies, Vol. 42, pp.1078-1094.

Bahmani-Oskooee, M. (1986), "Determinants of International Trade Flows: The Case of Developing Countries", Journal of Development Economics, Vol. 20, pp. 107-123.

Bahmani-Oskooee, M. and G. Goswami (2004), "Exchange Rate Sensitivity of Japan's Bilateral Trade Flows", Japan and the World Economy, Vol. 16, pp. 1-15.

Bahmani-Oskooee, M. and H. Harvey (2006), “How Sensitive are Malaysia’s Bilateral Trade Flows to Depreciation?”, Applied Economics, Vol. 38, pp. 1279-1286.

Bahmani-Oskooee, M. and H. Fariditavana, (2015), “Nonlinear ARDL Approach, Asymmetric Effects and the J-Curve”, Journal of Economic Studies, Vol. 42, pp. 519-530.

Bahmani-Oskooee, M. and S. Saha, (2015), “On the Relation between Stock Prices and Exchange Rates: A Review Article”, Journal of Economic Studies, Vol. 42, pp. 707-732.

Bahmani-Oskooee, M. and Fariditavana, H. (2016), “Nonlinear ARDL Approach and the J-Curve Phenomenon,” Open Economies Review, 27, 51-70.

Bahmani-Oskooee, M., H. Harvey, and S. Hegerty (2013), "Empirical Tests of the Marshall-Lerner Condition: A Literature Review", Journal of Economic Studies, Vol. 40, pp. 411-443

Bahmani-Oskooee, M., C. Economidou, and G. Goswami (2005a), “How Sensitive are the UK’s Inpayments and Outpayments to the Value of the British Pound”, Journal of Economic Studies, Vol. 32, pp. 455-467.

Bahmani-Oskooee, M., G. Goswami, and B. Talukdar (2005b), “Exchange Rate Sensitivity of the Canadian Bilateral Inpayments and Outpayments”, Economic Modeling, Vol. 22, pp. 745-757.

Bergstrand, J. H. (1987), “The U.S. Trade Deficit: A Perspective from Selected Bilateral Trade Models”, New England Economic Review, May-June Issue, pp. 19-31.

Bussiere, M. (2013), “Exchange rate Pass-through to Trade Prices: The Role of Nonlinearities and Asymmetries”, Oxford Bulletin of Economics and Statistics, Vol. 75, pp. 731-758.

Cushman, David O. (1987), “U.S. Bilateral Trade Balances and the Dollar”, Economics Letters, Vol. 24, pp. 363-367.

Delatte, Anne-Laure and Antonio Lopez-Villavicencio (2012), “Asymmetry Exchange Rate Pass-Through: Evidence from Major Countries”, Journal of Macroeconomics, 34, 833-844.

Durmaz, N. (2015), “Industry Level J-Curve in Turkey,” Journal of Economic Studies 42-4, 689-706.

Gogas, P. and I. Pragidis, (2015) "Are there asymmetries in fiscal policy shocks?", Journal of Economic Studies, Vol. 42, pp.303-321.

Gregoriou, A. (2017) "Modelling non-linear behaviour of block price deviations when trades are executed outside the bid-ask quotes.", Journal of Economic Studies, Vol. 44, pp.

Haynes, Stephen E., Michael M. Hutchison and Raymond F. Mikesell, (1986), "U.S. -Japanese Bilateral Trade and the Yen-Dollar Exchange Rate: An Empirical Analysis", Southern Economic Journal, Vol. 52, pp. 923-32.

Lima, L., C. Foffano Vasconcelos, J. Simão, and H. de Mendonça, (2016) "The quantitative easing effect on the stock market of the USA, the UK and Japan: An ARDL approach for the crisis period", Journal of Economic Studies, Vol. 43, pp.1006-1021.

Nusair, Salah A. (2017), “The J-curve Phenomenon in European Transition Economies: A Nonliear ARDL Approach”, International Review of Applied Economics, Vol. 31, pp. 1-27.

Pal, Debdatta, and Subrata K. Mitra (2016), “Asymmetric Oil Product Pricing in India: Evidence from a Multiple Threshold Nonlinear ARDL Model”, Economic Modelling, Vol. 59, 314-328.

Pesaran, Hashem M.; Yongcheol Shin and Richard J. Smith, (2001), "Bounds Testing Approach to the Analysis of Level Relationships", Journal of Applied Econometrics, Vol. 16, pp. 289-326.

Shin, Y, B. C. Yu, and M. Greenwood-Nimmo (2014) “Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework” Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications, eds. by R. Sickels and W. Horrace: Springer, Ney York, 281-314.

Verheyen, F. (2013), “Interest Rate Pass-Through in the EMU-New Evidence Using Nonlinear ARDL Framework”, Economics Bulletin, Vol. 33, No 1, pp. 729-739.