TRADING IN TURBULENT TIMES: COMPARING HOW EXCHANGE RATE VOLATILITY SHAPES ASIAN AND AFRICAN ECONOMIES

Mui-Yin Chin, Daniel Francois Meyer (), Sheue Li Ong and Fiona Jane Francis ()
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Mui-Yin Chin: Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University of Management and Technology, Malaysia2College of Business and Economics, University of Johannesburg, South Africa
Daniel Francois Meyer: College of Business and Economics, University of Johannesburg, South Africa
Sheue Li Ong: Faculty of Business and Economics, Universiti Malaya, Malaysia2College of Business and Economics, University of Johannesburg, South Africa4School of Mathematical Sciences & Center for Applied Mathematics of Guangxi, Guangxi Minzu University, P. R. China
Fiona Jane Francis: Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University of Management and Technology, Malaysia

Global Economy Journal (GEJ), 2025, vol. 25, issue 01n02, 1-20

Abstract: This study compares the impact of exchange rate volatility on trade performance in middle-income countries in the African and Asian regions. The results show that exchange rate volatility is statistically insignificant in affecting trade in the Asian region, suggesting a mature currency hedging system, while it significantly impacts trade in Africa, where traders’ risk-aversion leads to increased exports to mitigate revenue losses from exchange rate fluctuations. The cointegration tests indicate a long-run relationship between exchange rate volatility and trade in both regions, and the causality tests reveal a unidirectional causality from exports to exchange rate volatility in Asia, with a bidirectional relationship in Africa, highlighting regional differences in how exchange rate risk influences trade dynamics.

Keywords: Exchange rate volatility; GARCH; trade; the Asian region; the African region (search for similar items in EconPapers)
JEL-codes: C23 F10 F31 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1142/S2194565925500010

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