Exchange rate volatility and manufacturing commodity exports in ASEAN-5: A symmetric and asymmetric approach

Abstract

This study aims to investigate the influence of the volatility of exchange rates on manufacturing commodity exports in the ASEAN-5 (Indonesia, Singapore, Thailand, Malaysia, and the Philippines). The study used the ARCH/GARCH, ARDL, and Nonlinear ARDL to determine the symmetrical and asymmetrical influence of the volatility of the exchange rate on manufacturing exports in both the short run and long run. Five leading commodity exports for each of the ASEAN-5 countries were used and analyzed over the period January 2007–March 2019. Our strategy using the ARDL approach revealed that volatility has a significant influence on 13 commodity exports in the short term. While the Nonlinear ARDL approach revealed that volatility influenced 19 commodity exports. Additionally, in the long run, finding from ARDL and Nonlinear ARDL also indicates risk-averse behaviour by exporters. However, in the long run, the nonlinear model demonstrates that volatility asserts an asymmetric influence on nearly all commodity exports. With this, therefore, there is the need for policymakers to uphold steadiness in the exchange rate via the use of adequate foreign reserves and amplified the level of investment.

Keywords

• ARCH
• ARDL
• GARCH
• Exports
• Manufacturing commodities
• Nonlinear-ARDL