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Exchange Rate Volatility, Trade and “Fixing for Life” in Thailand

Author

Listed:
  • Teuku Rahmatsyah

    (ASEAN Secretariat, Jakarta, Indonesia)

  • Gulasekaran Rajaguru

    (Department of Economics, National University of Singapore)

  • Reza Siregar

    (School of Economics, University of Adelaide, Australia)

Abstract
At the outset of the 1997 financial crisis in East Asia, the quest to find a more suitable exchange rate policy has become an urgent policy challenge facing the East Asian economies. One of key policies agreed under Thailand’s August 1997 Letter of Intent (LOI) with the IMF was to adopt a more flexible exchange rate policy. The implementation took place in the early months of the crisis, but most of these Southeast Asian economies, including Thailand, have re-adopted their pre-1997 crisis rigid exchange rate policy in early 1999 (McKinnon, 2001). To grasp this “fixing for your life” phenomenon (Calvo and Reinhart 2000a and 2000b), we test the impact of real exchange rate volatilities of Thailand’s baht against the Japanese yen and the US dollar on the performance of the country’s bilateral exports and imports with Japan and the U.S. from 1970 to first quarter of 1997.

Suggested Citation

  • Teuku Rahmatsyah & Gulasekaran Rajaguru & Reza Siregar, 2002. "Exchange Rate Volatility, Trade and “Fixing for Life” in Thailand," Centre for International Economic Studies Working Papers 2002-12, University of Adelaide, Centre for International Economic Studies.
    • Handle: RePEc:adl:cieswp:2002-12
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    Cited by:

    1. Christoph Himmels & Tatiana Kirsanova, 2009. "The interest rate - exchange rate nexus: exchange rate regimes and policy equilibria," Discussion Papers 0904, University of Exeter, Department of Economics.
    2. Yii Siing Wong & Chong Mun Ho & Brian Dollery, 2012. "Impact of exchange rate volatility on import flows: the case of Malaysia and the United States," Applied Financial Economics, Taylor & Francis Journals, vol. 22(24), pages 2027-2034, December.
    3. Reza Siregar, 2011. "The Concepts of Equilibrium Exchange Rate: A Survey of Literature," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp81, April.
    4. masron, Tajul arrifin & Mohd naseem niaz, Ahmad, 2008. "Export, Economic Integration and Exchange Rate Volatility in Turkey and Malaysia," MPRA Paper 41519, University Library of Munich, Germany.
    5. Himmels, Christoph & Kirsanova, Tatiana, 2018. "Discretionary policy in a small open economy: Exchange rate regimes and multiple equilibria," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 53-64.
    6. Vithessonthi, Chaiporn & Tongurai, Jittima, 2014. "The spillover effects of unremunerated reserve requirements: Evidence from Thailand," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 338-351.
    7. Won-Cheol Yun, 2012. "Yuan revaluation and its implications," Applied Economics Letters, Taylor & Francis Journals, vol. 19(2), pages 149-154, February.
    8. Hall, Stephen & Hondroyiannis, George & Swamy, P.A.V.B. & Tavlas, George & Ulan, Michael, 2010. "Exchange-rate volatility and export performance: Do emerging market economies resemble industrial countries or other developing countries?," Economic Modelling, Elsevier, vol. 27(6), pages 1514-1521, November.
    9. Erdal Demirhan & Banu Demirhan, 2015. "The Dynamic Effect of ExchangeRate Volatility on Turkish Exports: Parsimonious Error-Correction Model Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(4), pages 429-451, September.
    10. Prasertnukul, Weera & Kim, Donghun & Kakinaka, Makoto, 2010. "Exchange rates, price levels, and inflation targeting: Evidence from Asian countries," Japan and the World Economy, Elsevier, vol. 22(3), pages 173-182, August.
    11. Chen, Shiu-Sheng, 2006. "Revisiting the interest rate-exchange rate nexus: a Markov-switching approach," Journal of Development Economics, Elsevier, vol. 79(1), pages 208-224, February.
    12. Fizza Malik, 2016. "Modeling Dynamics of Exchange Rates Volatility: A Case of Pakistan from 1980-2010," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 5(3), pages 144-161, September.
    13. Siregar, Reza & Pontines, Victor & Mohd Hussain, Nurulhuda, 2010. "The US Subprime Crises and Extreme Market Pressures in Asia," MPRA Paper 22995, University Library of Munich, Germany.
    14. Aihua Wang & Faruk Balli & Xiumin Li, 2015. "Possible Best Currency Basket Selection from the Perspective of Real Effective Exchange Rate," Pacific Economic Review, Wiley Blackwell, vol. 20(4), pages 635-650, October.
    15. Siregar, Reza & Rajan, Ramkishen S., 2004. "Impact of exchange rate volatility on Indonesia's trade performance in the 1990s," Journal of the Japanese and International Economies, Elsevier, vol. 18(2), pages 218-240, June.
    16. Siwei Goo & Reza Siregar, 2009. "Economic Shocks And Exchange Rate As A Shock Absorber In Indonesia And Thailand," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp72, April.
    17. Muller, Aline & Verschoor, Willem F.C., 2009. "The effect of exchange rate variability on US shareholder wealth," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 1963-1972, November.

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    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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