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The Effect of Exports and Imports on Exchange Rate over Short and Long Time Horizons: Evidence from Asian Countries

Authors:

D. M. U. H. Dissanayake ,

University of Kelaniya, LK
About D. M. U. H.
Department of Finance, Faculty of Commerce and Management Studies
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G. A. P. Kethmi

University of Kelaniya, LK
About G. A. P.
Department of Finance, Faculty of Commerce and Management Studies
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Abstract

Purpose: The purpose of this study is to examine the effect of export and imports on exchange rates.

 

Design/Methodology/Approach: This study includes eighteen Asian countries as the sample for the period of ten years from 2010 to 2019 and analyzed using Autoregressive Lag (ARDL) model. Annual exports and imports of each country are used as the Independent variable along with the dependent variable, real exchange rate. Findings: The results show that the impact of exports on the exchange rate is significant and negative in both short and long run. However, the impact of imports on the exchange rate is significant and negative in short run whereas the effect is significant and positive in the long run.

 

Originality: This study uses Asian countries as the context of the study to examine the effect of exports and imports on real exchange rate. There are a limited number of studies have examined the current debate by covering the entire Asian Region. In examining the relationship between international trade and exchange rate, the majority of the literature investigate the impact of exchange rate on imports and exports whereas; this study contributes to the literature by examining the impact of exports and imports on exchange rate over the short and long-time horizons.

How to Cite: Dissanayake, D. M. U. H., & Kethmi, G. A. P. (2021). The Effect of Exports and Imports on Exchange Rate over Short and Long Time Horizons: Evidence from Asian Countries. South Asian Journal of Finance, 1(1), 48–60. DOI: http://doi.org/10.4038/sajf.v1i1.27
Published on 01 Jun 2021.
Peer Reviewed

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