The External Exchange Rate Volatility Influence on The Trade Flows: Evidence from Nonlinear ARDL Model

Ennadifi Imane, Bisharat Hussain Chang, Tarek Abbas Elsherazy, Wing-Keung Wong and Mohammed Uddin
Additional contact information
Ennadifi Imane: Interdisciplinary Research Laboratory in Economics, Finance and Management of Organizations (LIREFMO), Sidi Mohamed Ben Abdellah University, Faculty of Law, Economics and Social Sciences, FEZ, FEZ MEKNES, Morocco
Bisharat Hussain Chang: Department of Business Administration, Sukkur IBA University, Sukkur, Sindh, Pakistan
Tarek Abbas Elsherazy: University of Strathclyde, Glasgow, 16 Richmond St, Glasgow G1 1XQ, UK
Wing-Keung Wong: Department of Finance, Fintech & Blockchain Research Center, and Big Data Research Center, Asia University, Taiwan. Department of Medical Research, China Medical University Hospital Department of Economics and Finance, The Hang Seng University of Hong Kong

Advances in Decision Sciences, 2023, vol. 27, issue 2, 75-98

Abstract: [Purpose] Major trade partners of China, including Germany, Korea, the United Kingdom, the Netherlands, Malaysia, and Mexico, are examined in the research to see how currency exchange rate variations affect everything for Germany, Korea, the United Kingdom, the Netherlands, Malaysia, and Mexico. Our study also extends the existing literature by investigating the influence of external instability on Chinese exports to the US. [Design/methodology/approach] To conduct this study’s analysis, we apply the bounds test technique to the co-integration and error correction model to examine the asymmetric influence of third-country exchange rate volatility on trade flows of China in the short-run and long-run effect through measuring with two approaches, ARDL and NARDL on bilateral trade among Korea, Germany, Netherlands, United Kingdom, Malaysia, and Mexico. [Findings] The investigation found that third-country exchange rate (China/USD) volatility has a varying influence on China’s exports to different countries, with short-term asymmetrical effects observed in Korea, Germany, the United Kingdom, and Malaysia. In the long run, only Korea and the United Kingdom show an asymmetric effect on China’s exports. These findings highlight the need to consider the impact of significant fluctuations in third-country exchange rate volatility before making relevant policies or decisions. [Originality/value] As far as we know, this is the first paper in the literature that employs quantitative models, analyzes the empirical data, and provides various insights which are helpful in the decision-making process concerning export strategies, exchange rates, and international trade.

Keywords: Third country exchange rate volatility (TCV); exports; China; Autoregressive Distributive Lag model; Nonlinear ARDL model (search for similar items in EconPapers)
JEL-codes: C32 F31 F41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://iads.site/the-external-exchange-rate-volat ... onlinear-ardl-model/
https://iads.site/wp-content/uploads/2023/07/The-E ... inear-ARDL-Model.pdf (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:aag:wpaper:v:27:y:2023:i:2:p:75-98

Access Statistics for this article

More articles in Advances in Decision Sciences from Asia University, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by Vincent Pan ().