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How do exchange rates affect the Big One? An empirical analysis of the effect of exchange rates on RCEP exports using the gravity model

Author

Listed:
  • Jose Adlai M. Tancangco

    (Ateneo de Manila University
    Bangko Sentral ng Pilipinas)

Abstract

The often disparate and conflicting effects of exchange rate on bilateral exports reported by previous literature necessitate a further study of the relationship between monetary and trade variables. This study contributes to the stream of literature by analyzing monetary variables such as exchange rate volatility, exchange rate misalignment, exchange rate regimes, and real effective exchange rates with bilateral aggregate exports through a sample of 15 nations comprising the Regional Comprehensive Economic Partnership (RCEP) region for the years 1996 to 2017 using Ordinary Least Squares and Poisson Pseudo-Maximum Likelihood panel fixed effects regression. Results indicate that a country’s real effective exchange rate ratio and the exchange rate volatility for countries under a floating exchange rate regime reduce aggregate exports.Â

Suggested Citation

  • Jose Adlai M. Tancangco, 2022. "How do exchange rates affect the Big One? An empirical analysis of the effect of exchange rates on RCEP exports using the gravity model," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 59(2), pages 135-165, December.
    • Handle: RePEc:phs:prejrn:v:59:y:2022:i:2:p:135-165
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    File URL: https://pre.econ.upd.edu.ph/index.php/pre/article/view/1031/956
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    More about this item

    Keywords

    exchange rates; volatility; gravity model;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F15 - International Economics - - Trade - - - Economic Integration

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