Real exchange rate and bilateral trade balance of Cambodia: A panel investigation

Yannick Bineau

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Abstract: This article investigates the relationship between Cambodia's bilateral trade balance and its fundamental determinants: the real exchange rate and real income differentials between Cambodia and its foreign trading partners. The Panel Fully Modified Ordinary Least Squares method is applied to a sample of 10 trading partners for the 1998â€"2014 period on a quarterly basis. The main findings suggest that a devaluation of the real exchange rate significantly improves bilateral trade balance. However, it is not possible to prove that any modification of the real exchange rate will cause a trade balance adjustment that follows the standard J-curve shape, although two of the 10 sampled countries are exceptions. The model also shows that higher foreign partner real incomes relative to domestic real income levels cause a significant inverse change in bilateral trade balance for five of the sampled countries, suggesting that Cambodia is highly dependent on imports.

Keywords: Trade balance; Real exchange rate; Cambodia; Growth; FMOLS and DOLS Estimators (search for similar items in EconPapers)
Date: 2016-02
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Citations: View citations in EconPapers (3)

Published in Economics Bulletin, 2016, 36

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Journal Article: Real exchange rate and bilateral trade balance of Cambodia: A panel investigation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01612436

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