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The Asymmetric Effects of Exchange Rate Changes on the Trade Balance of Singapore

Mohsen Bahmani-Oskooee () and Harvey Hanafiah ()
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Harvey Hanafiah: Department of Economics, Penn State University, Mont Alto, PA17237, USA

Global Economy Journal, 2017, vol. 17, issue 4, 11

Abstract: Previous studies that tested the short-run and long-run effects of exchange rate changes on trade balances assumed that the effects are symmetric. The more recent research direction has now changed to investigating the possibility of asymmetric effects. In this paper, we assess the short-run and long-run effects of exchange rate changes on the bilateral trade balances of Singapore with her 11 partners. By applying the nonlinear ARDL approach, which separates appreciations from depreciations, we find that exchange rate changes have short-run asymmetric effects in most models. The short-run effects, however, lasted into the long run in a few models. In the long run, while depreciation improves Singapore’s trade balance with the U.S., it hurts it with Malaysia and China. These three partners account for almost 50 % of Singapore’s trade.

Keywords: asymmetry analysis; J-curve; Singapore; nonlinear ARDL approach (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2017
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