Premium
Exchange Rate Volatility and Intra‐Asia Trade: Evidence by Type of Goods
Author(s) -
Tang Hsiao Chink
Publication year - 2014
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12095
Subject(s) - china , volatility (finance) , economics , exchange rate , international economics , international trade , south asia , goods and services , bilateral trade , monetary economics , economy , geography , financial economics , ethnology , archaeology , history
This paper examines the impact of intra‐Asia exchange rate volatility on intra‐Asia trade in primary goods, intermediate goods, equipment goods and consumption goods from 1980 to 2009. For Asia, the evidence shows that as intraregional exchange rate volatility increases, intraregional exports in these goods fall. This adverse impact is even more pronounced in the subregion of Association of Southeast Asian Nations (ASEAN)+5 comprising ASEAN member countries plus the People's Republic of China; Hong Kong, China; Japan; the Republic of Korea; and Taipei, China; and especially among intermediate and equipment exports. Again, the impact magnifies in an even smaller subgroup excluding the smaller ASEAN economies. These results underline the significant impact of exchange rate volatility on the region's production networks. For South Asia, however, exchange rate volatility appears to have a positive impact on exports. Still, caution is warranted given that South Asian economies trade relatively little with each other.