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Do the exchange rate fluctuations of trading partners affect the export competitiveness of a country? Malaysia as a case study

Author

Listed:
  • Yaacob, Nurul
  • Masih, Mansur

Abstract

This paper focuses on the following questions: (i))Is the export of Malaysia cointegrated with the exchange rates of her trading partners?(ii)Do the exchange rates of the trading partners have a significant impact on the competitiveness of Malaysia’s exports? (iii)Is there a need for Malaysia to cut her profit mark up to increase exports when her trading partners’ currency depreciated against Ringgit? Our findings tend to give the corresponding answers to the above three questions:(i) Yes, the export of Malaysia is cointegrated with the exchange rates of her trading partners (ii) No, Malaysia’s export is found to be the most exogenous variable in the model thus making Malaysia’s export variable impacting the exchange rates. (iii) No, based on our quantitative analysis, policy makers are suggested not to be very sensitive to the exchange rate fluctuations of its trading partners ,since the partners’ exchange rate changes may have no significant impact on her exports. The findings have strong policy implications for a developing country like Malaysia.

Suggested Citation

  • Yaacob, Nurul & Masih, Mansur, 2017. "Do the exchange rate fluctuations of trading partners affect the export competitiveness of a country? Malaysia as a case study," MPRA Paper 108037, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:108037
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    export performance; exchange rates of trading partners; VECM; VDC; Malaysia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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