Exchange rate volatility and its impact on commodity trade flows between Singapore and Malaysia

Mohsen Bahmani-Oskooee, Hanafiah Harvey

Research output: Contribution to journalArticle

Abstract

Since advent of current float in 1973, the literature on the impact of exchange rate volatility on trade flows has grown so rapidly that most countries have their own literature and Singapore as our country of concern is no exception. Previous studies have investigated the response of aggregate trade flows of Singapore with the rest of the world to exchange rate volatility and have found mostly insignificant link. In this paper we argue that they all suffer from aggregation bias and concentrate on trade flows between Singapore and her major partner, Malaysia. After disaggregating their trade flows by commodity we find that exchange rate volatility has significant short-run effects in 70 out of 156 exporting industries and in 73 out of 155 importing industries. However, short-run effects last into the long run only in 46 exporting and 36 importing industries. We also find that less than 50% of Singapore's industries were affected by the Asian Financial Crisis in 1997.

Original languageEnglish (US)
Pages (from-to)17-33
Number of pages17
JournalJournal of Economic Development
Volume42
Issue number1
StatePublished - Jan 1 2017

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Malaysia
Commodity trade
Exchange rate volatility
Industry
Trade flows
Singapore
Short-run
Importing
Exporting
Aggregation bias
Float
Asian financial crisis
Commodities

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Finance

Cite this

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Exchange rate volatility and its impact on commodity trade flows between Singapore and Malaysia. / Bahmani-Oskooee, Mohsen; Harvey, Hanafiah.

In: Journal of Economic Development, Vol. 42, No. 1, 01.01.2017, p. 17-33.

Research output: Contribution to journalArticle

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