Trade Balance, Foreign Exchange and Macroeconomic Impacts: An Empirical Assessment for China and Malaysia

Tze-Haw Chan ()

MPRA Paper from University Library of Munich, Germany

Abstract: China appears as the biggest trading partner for ASEAN economy but it is inconclusive whether the complementarities between China and regional economies offset China’s competitive threat. We assess if real exchange fluctuations and the demand-supply channels determine the Malaysia-China trade balances in the global crises era, 1997-2010. The findings reveal that despite the long run effect of real exchange on trade balances, the Keynesian demand channel was not uphold during and after the global financial crisis – due to the contractionary effect on Malaysian output. Currency devaluation for exports gains is insufficient to sustain Malaysia output expansion against China. Further productivity growth in real and tradable sectors is essentially needed. Meanwhile, the Chinese inflation impact is not evident following the foreign exchange shock and, the study generally supports the complementary role of China in the Malaysia-China bilateral trading.

Keywords: Trade Balances; Contractionary effect; global crises; bootstrapping; VARX; VECMX (search for similar items in EconPapers)
JEL-codes: C51 F41 (search for similar items in EconPapers)
Date: 2014-01-11, Revised 2014-08-10
New Economics Papers: this item is included in nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/59539/1/MPRA_paper_59539.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:59539

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().