Early studies on the impact of currency devaluation or depreciation on the trade balance focused on using aggregate trade data between one country and rest of the world and estimated the well-known Marshall-Lerner (ML) condition. Due to aggregation bias, a second set of studies have relied upon disaggregated trade data at bilateral level. However, due to lack of import and export price levels at bilateral level, these studies have directly linked nominal exports and imports to the exchange rate. In this paper, we expand the literature of the second group by examining the sensitivity of inpayments and outpayments of Singapore with each of her 13 largest trading partners. Evidence shows that real depreciation or devaluation of Singapore dollar has significant effect on her inpayments and outpayments in the short run. In the long run it increases Singapore's export earnings from three of its partners and reduces her outpayments to only two countries.
All Science Journal Classification (ASJC) codes
- Sociology and Political Science
- Public Administration
- Political Science and International Relations