Title: Exchange rate sensitivity of the USA-Singapore trade flows: evidence from industry data

Authors: Mohsen Bahmani-Oskooee; Hanafiah Harvey

Addresses: The Center for Research on International Economics and Department of Economics, The University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA ' Department of Economics, Pennsylvania State University, Mont Alto, PA 17237, USA

Abstract: The Marshall-Lerner condition is a condition that is judged to assess the long-run effects of currency depreciation on the trade balance. It is obtained by estimating price elasticities of a country's demand for imports and rest of the world demand for its exports. When the analysis is extended to bilateral level between two countries using aggregate bilateral trade data or bilateral commodity data, due to lack of prices researchers directly relate inpayments and outpayments to the exchange rate in addition to scale variables. In this paper we try to determine the short-run and long-run effects of real depreciation of the dollar on inpayments of 141 US industries that export to Singapore and 59 US industries that import from Singapore. While we find that most industries are affected in the short-run. However, the short-run effects last into the long-run only in 45 exporting industries and 15 importing industries. Most of the affected industries are small.

Keywords: United States; USA; Singapore; commodity trade; bounds testing; exchange rates; exchange rate sensitivity; trade flows; currency depreciation; trade balance; price elasticities; import demand; export demand; short-term effects; long-term effects.

DOI: 10.1504/IJTGM.2015.069426

International Journal of Trade and Global Markets, 2015 Vol.8 No.2, pp.152 - 179

Received: 04 Feb 2015
Accepted: 05 Mar 2015

Published online: 15 May 2015 *

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