Abstract
Non-linear effect of exchange rate volatility on exports: The role of financial sector development in emerging East Asian economies
Myint Moe Chit and Amrit Judge
Department of Economics and Statistics, Middlesex University Business School, London, UK
This paper empirically examines the role of financial sector development in influencing the impact of exchange rate volatility on the exports of five emerging East Asian countries – China, Indonesia, Malaysia, the Philippines and Thailand – using a GMM-IV estimation method. The results indicate that the effect of exchange rate volatility on exports is conditional on the level of financial sector development. The less financially developed an economy the more its exports are adversely affected by exchange rate volatility. In addition, a stable exchange rate seems to be a necessary condition to achieve export promotion via a currency depreciation in these economies.
Key words: East Asia; Exports; Exchange rate volatility; Financial sector development
JEL Classification: F13; F14; F31; O16
Chit, M. and Judge, A. (2011) ‘Non-linear effect of exchange rate volatility on exports and the role of financial sector development: Evidence from the emerging East Asian economies’, International Review of Applied Economics, 25(1), pp. 107-119. http://www.tandfonline.com/doi/abs/10.1080/02692171.2010.483463#preview
Chit, M. and Judge, A. (2011) ‘Non-linear effect of exchange rate volatility on exports and the role of financial sector development: Evidence from the emerging East Asian economies’, International Review of Applied Economics, 25(1), pp. 107-119. http://www.tandfonline.com/doi/abs/10.1080/02692171.2010.483463#preview
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