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An Investigation of the Effects of Prices and Exchange Rates on Trade Flows in East Asia
Author(s) -
Chua Soo Y.,
Sharma Subhash C.
Publication year - 1998
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/1467-8381.00062
Subject(s) - cointegration , economics , exchange rate , autoregressive model , error correction model , monetary economics , effective exchange rate , short run , foreign exchange , vector autoregression , econometrics , international economics
This paper investigates the dynamic response of imports and exports to changes in domestic prices, foreign prices and real effective exchange rates for Korea, the Philippines, Singapore and Thailand. A vector autoregressive model and cointegration analysis are used to study the long‐run relationships and the short‐run dynamics of these variables. The vector error‐correction model indicates that in almost all cases, domestic and foreign prices have a larger impact on the trade flows than the real effective exchange rates. We cannot find any significant difference in the response time of import demand to shocks in prices and exchange rates; however, the response time for export supply varies among countries.