Factors Affecting Export Competitiveness of Singapore’s Manufacturing Sector: A Regression Analysis

Soon-Beng Chew, Jia Hong Chen, Ming Chou Hung and Teresa Wan Ying Lek
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Soon-Beng Chew: Economics at Nanyang Technological University (NTU), Singapore
Jia Hong Chen: Economic Growth Centre at NTU, Singapore
Ming Chou Hung: Economic Growth Centre at NTU, Singapore
Teresa Wan Ying Lek: Economic Growth Centre at NTU, Singapore

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2018, vol. 21, issue 02, 1-11

Abstract: This paper examines the export competitiveness of the manufacturing sector in Singapore. More specifically, we examine how the existence of import content of exports, productivity gains, and profit margins affect the competitiveness of Singapore’s manufacturing exports. Using proxies such as price of exports, price of imports, unit business costs, and net operating surplus over manufacturing output, we analyze our results empirically and seek to show the significance of these variables in affecting the export competitiveness in the unique case of Singapore. As price of exports and price of imports are both expressed in Singapore dollars (SGD) and this captures the exchange rate, we can assess the impact of a stronger SGD on the export competitiveness of Singapore’s manufacturing sector. Traditional economic notions according to Mundell–Fleming model have predominantly assumed that the appreciation of local currency would stimulate imports and harm exports, vice versa. However, in the case of Singapore where there is a high import content in exports, our paper reveals that exports are not adversely affected by an appreciation of SGD. This is attributed to the direct causal relationship between import prices and export prices that helps to minimize the effects of a higher cost of export production brought about by appreciation, with lower import costs. Furthermore, the impacts of productivity growth and profit margins on export competitiveness are very small, supporting the notion that Singapore exporters are price-takers.

Keywords: Export competitiveness; unit business cost; Singapore manufacturing sector; exchange rate appreciation (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1142/S0219091518500091

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