Do inpayments and outpayments respond to exchange rate changes asymmetrically: Evidence from Malaysia
Mohsen Bahmani-OskooeeThe Center for Research on International Economics and the Department of Economics, The University of Wisconsin-Milwaukee, Milwaukee, Wisconsin, USACorrespondence[email protected]
&
Hanafiah HarveyDepartment of Economics, Pennsylvania State University, Mont Alto, Mont Alto, Pennsylvania, USA
Since the pass-through of exchange rate changes on import and export prices are asymmetric, we expect a country’s inpayments (export earnings) and outpayments (cost of imports) to also react to exchange rate changes asymmetrically. We demonstrate this hypothesis by considering trade between Malaysia and each of her 11 largest trading partners. We find that while the short-run effects of exchange rate changes on Malaysia’s inpayments and outpayments are asymmetric with all partners, the long-run asymmetric effects are present in less than half of the partners. The results are partner specific.
Valuable comments of an anonymous referee are greatly appreciated. Any errors, however, are our own.
Notes
1 Pesaran, Shin, and Smith (Citation2001) show that their upper-bound critical values are also good for models that have a combination of I(0) and I(1) variables.
2 See Shin, Yu, and Greenwood-Nimmo (Citation2014, 291).
4 These results are more or less consistent with those reported by Bahmani-Oskooee and Harvey (Citation2006).
5 All other diagnostic statistics are similar to those in and do not need detailed explanations. There is a lack of serial correlation in most models, most optimum models are correctly specified, and estimates are stable.
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