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Exchange-rate volatility and commodity trade between the USA and Indonesia

Author

Listed:
  • Mohsen Bahmani-Oskooee
  • Hanafiah Harvey
  • Scott W. Hegerty

Abstract

Since the introduction of the current system of floating exchange-rate regimes, the empirical literature on its implications has grown, with various studies exploring the effects of exchange-rate volatility using different data selection and modeling techniques. Most of these results have been mixed, finding that risk can have positive, negative, or insignificant effects on export and import flows. This study extends the empirical literature by focusing on the role of exchange-rate volatility on trade between the USA and Indonesia. We use disaggregated trade data by commodity and investigate 108 US export industries to Indonesia and 32 US import industries. Our results show that more than half of export and import industries are affected by real exchange-rate volatility in the short run. However, only a third of the export and import industries register long-run effects. We find that, for large industries, exports and imports behave similarly, but that far more small Indonesian exporters see their trade reduced by increased risk.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Hanafiah Harvey & Scott W. Hegerty, 2015. "Exchange-rate volatility and commodity trade between the USA and Indonesia," New Zealand Economic Papers, Taylor & Francis Journals, vol. 49(1), pages 78-102, April.
    • Handle: RePEc:taf:nzecpp:v:49:y:2015:i:1:p:78-102
    DOI: 10.1080/00779954.2014.901136
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    Cited by:

    1. repec:idn:journl:v:20:y:2017:i:1b:p:1-22 is not listed on IDEAS
    2. Unggul Heriqbaldi & Miguel Angel Esquivias & Rossanto Dwi Handoyo & Alfira Cahyaning Rifami & Hilda Rohmawati, 2022. "Exchange rate volatility and trade flows in Indonesia and ten main trade partners: asymmetric effects," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 40(4), pages 708-739, October.
    3. Nasir, Muhammad Ali & Vo, Xuan Vinh, 2020. "A quarter century of inflation targeting & structural change in exchange rate pass-through: Evidence from the first three movers," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 42-61.
    4. Pabai Fofanah, 2020. "Effects of Exchange Rate Volatility on Trade: Evidence from West Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 12(3), pages 32-52.
    5. Thorsten Janus, 2020. "Terms of trade volatility, exports, and GDP," Economic Change and Restructuring, Springer, vol. 53(1), pages 25-38, February.
    6. William Gabriel Brafu-Insaidoo, 2019. "International reserves, external debt maturity and exchange rate volatility in Ghana," Economic Change and Restructuring, Springer, vol. 52(3), pages 181-202, August.
    7. Abdul Rashid & Shahid Mahmood Waqar, 2017. "Exchange rate fluctuations, firm size, and export behavior: an empirical investigation," Small Business Economics, Springer, vol. 49(3), pages 609-625, October.
    8. Hussaini Umaru & Aguda Niyi A. & Nordiana Osagie Davies, 2018. "The Effects of Exchange Rate Volatility on Economic Growth of West African English-Speaking Countries," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(4), pages 131-143, October.

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