China-Malaysia’s Trading and Exchange Rate: Complementary or Conflicting Features?

Tze-Haw Chan () and Chee-Wooi Hooy

MPRA Paper from University Library of Munich, Germany

Abstract: Over the last decade, China and Malaysia have committed to export-led growth policy based on maintenance of their undervalued currencies. While both nations have recorded current account surplus and devoted for regional trade integration, it was lately claimed that the Chinese foreign exchange regime poses her as a formidable export competitor and offers further threat to the crowding out of other developing Asian, including Malaysia. Such scenario motivated us to examine the dynamic nexus of exchange rate impact on bilateral export and import flows between China and Malaysia. Our analysis contributed in using high frequency monthly data for the recent period from January 1990 to January 2008, based on the Autoregressive Distributed Lag (ARDL) bound testing procedure and generalised impulse response analysis. Our empirical findings reveal that the Marshall-Lerner condition holds in the long run but only the short run import demands adhere to the potential J-curve pattern. In brief, the study supports for the complementary role of China instead of conflicting (competing) features in the China-Malaysia bilateral trading.

Keywords: Exchange rates; J-curve; Marshall-Lerner Condition; ARDL Bound Test (search for similar items in EconPapers)
JEL-codes: F10 F31 (search for similar items in EconPapers)
Date: 2010-04-06
New Economics Papers: this item is included in nep-int, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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