Title: How sensitive are Singapore's inpayments and outpayments to exchange rate changes: evidence from commodity trade with Malaysia

Authors: Mohsen Bahmani-Oskooee; Hanafiah Harvey

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

Abstract: There are a few methods that could be used to assess the impact of exchange rate changes on the trade balance of a country. One of them is to analyse the effects of exchange rate changes on a country's inpayments and outpayments at the bilateral level. One study that did this between Singapore and her 13 largest partners did not find any significant effects of exchange rate changes on Singapore's inpayments from and outpayments to Malaysia, the largest trading partner. Suspecting that such findings could suffer from aggregation bias, we disaggregate the trade flows between the two countries by commodity and investigate the sensitivity of the inpayments of 156 Singapore export industries which engage in 98% of exports to Malaysia, and the outpayments of 133 import industries which conduct 96.7% of imports from Malaysia. Application of the bounds testing approach to each and every industry's model revealed that most industries respond to exchange rate changes in the short run. In the long run, however, only the inpayments of 62 industries and outpayments of 52 industries are affected.

Keywords: inpayments; outpayments; Singapore; Malaysia; commodity trade.

DOI: 10.1504/IJPP.2018.091946

International Journal of Public Policy, 2018 Vol.14 No.3/4, pp.165 - 205

Received: 31 Oct 2015
Accepted: 23 Nov 2016
Published online: 22 May 2018 *

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