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Real exchange rate and bilateral trade balance of Cambodia: A panel investigation

Author

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  • Yannick Bineau

    (University of Lille1)

Abstract

This article investigates the relationship between Cambodia's bilateral trade balance and its fundamental determinants: the real exchange rate and real income differentials between Cambodia and its foreign trading partners. The Panel Fully Modified Ordinary Least Squares method is applied to a sample of 10 trading partners for the 1998–2014 period on a quarterly basis. The main findings suggest that a devaluation of the real exchange rate significantly improves bilateral trade balance. However, it is not possible to prove that any modification of the real exchange rate will cause a trade balance adjustment that follows the standard J-curve shape, although two of the 10 sampled countries are exceptions. The model also shows that higher foreign partner real incomes relative to domestic real income levels cause a significant inverse change in bilateral trade balance for five of the sampled countries, suggesting that Cambodia is highly dependent on imports.

Suggested Citation

  • Yannick Bineau, 2016. "Real exchange rate and bilateral trade balance of Cambodia: A panel investigation," Economics Bulletin, AccessEcon, vol. 36(2), pages 895-900.
    • Handle: RePEc:ebl:ecbull:eb-16-00075
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade balance; real exchange rate; Cambodia; FMOLS; J-curve; growth.;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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