Title: Exchange rate sensitivity of Singapore's inpayments and outpayments at bilateral level

Authors: Mohsen Bahmani-Oskooee; Hanafiah Harvey

Addresses: Center for Research on International Economics; The Department of Economics University of Wisconsin, P.O. Box 413, Milwaukee, WI 53201, USA ' Department of Economics, Penn State University, Mont Alto, PA 17237, USA

Abstract: Early studies on the impact of currency devaluation or depreciation on the trade balance focused on using aggregate trade data between one country and rest of the world and estimated the well-known Marshall-Lerner (ML) condition. Due to aggregation bias, a second set of studies have relied upon disaggregated trade data at bilateral level. However, due to lack of import and export price levels at bilateral level, these studies have directly linked nominal exports and imports to the exchange rate. In this paper, we expand the literature of the second group by examining the sensitivity of inpayments and outpayments of Singapore with each of her 13 largest trading partners. Evidence shows that real depreciation or devaluation of Singapore dollar has significant effect on her inpayments and outpayments in the short run. In the long run it increases Singapore's export earnings from three of its partners and reduces her outpayments to only two countries.

Keywords: currency devaluation; inpayments; outpayments; Singapore; exchange rate sensitivity; bilateral level; currency depreciation; trade balance; export earnings; exports.

DOI: 10.1504/IJPP.2013.056571

International Journal of Public Policy, 2013 Vol.9 No.4/5/6, pp.292 - 305

Received: 22 May 2012
Accepted: 25 Oct 2012
Published online: 31 Jan 2014 *

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