Essays on applied exchange rate issues: some new evidence on the export led growth hypothesis, exchange rate exposure, and the exchange rate volatility-export nexus

Abstract

The thesis comprises three essays, all of which are empirical studies of different issues on exchange rates. Implementing advanced econometrics methodologies with monthly time series data, these studies focus on macroeconomic determinants to measure the relationships within the variables. The first essay (Chapter Two) re-examines the robustness of the export-led growth hypothesis across the exchange rate regimes in Malaysia. According to the exchange rate regime history, Malaysia experienced three different exchange rate mechanisms from 1990 to 2010. Generally, the results vary across the time and regimes. Specifically, the study suggests bi-directional and/or unidirectional causality between exports and economic growth across the regimes, both in the short-run and long-run. The second essay (Chapter Three) tries to bridge the gap between the exchange rate issues by investigating the impact exchange rate exposure on sector level in Malaysia from October, 1992 to December, 2010. The purpose of this study is to examine the impact of the exchange rate exposure in Malaysia sectorial returns by using an augmented model. Overall, in all instances, the results suggest that the exchange rate exposures in Malaysia can be categorized as the long memory in the volatility process. After investigating currency exposure in two types of models, the results further suggest that the sectors are largely affected by the currency fluctuations. The third essay (Chapter Four) explores the channels and magnitude of exchange rate volatility-export nexus empirically on the export flow of five ASEAN countries namely, Singapore, Malaysia, Thailand, Philippines and Indonesia to the United States from January, 1990 to December, 2010. The major results show that increases in the volatility of the real bilateral exchange rate, exert significant effects upon export demand in the short run in each of the ASEAN countries. This study further suggests significant negative effects from the bilateral exchange rate volatility of exports flow in Singapore, Malaysia and Philippines. However, these findings do not apply to Indonesia and Thailand.

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ORCID for Jan M. Podivinsky: orcid.org/0000-0002-4921-1189

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