The asymmetric effects of the exchange rate on bilateral trade between the United Kingdom and Germany
- Authors: Kamwiyo, Craig
- Date: 2024-04
- Subjects: Foreign exchange rate , Foreign trade regulation -- Great Britain , Foreign trade regulation -- Germany , Commercial treaties
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/65086 , vital:74021
- Description: Brexit has given the United Kingdom greater autonomy over its international trade policies and as a result, there is a need to understand the dynamics around the effects of exchange rate on trade balances. Therefore, this study sought to investigate the effects of the pound to euro exchange rate on trade between the United Kingdom and Germany. In so doing, the study investigated the existence of the J-curve phenomenon in the bilateral trade balance. While most existing studies focus on aggregating the trade balance, this study considers disaggregating the trade balance at industrial level. Therefore, the disaggregated trade balance led to several unique studies catering for the twelve biggest industries that make up the trade balance. In addition, the study also does away with the assumption of linearity in the effects of exchange rate changes on the trade balance by making use of asymmetric analysis. For this purpose, the study uses the linear autoregressive distributed lag (ARDL) and the nonlinear autoregressive distributed lag (NARDL) models to analyse monthly data over the period of January 2010 to August 2022. The results provide evidence supporting the existence of the J-curve effect among linear ARDL and NARLD models. Furthermore, it was found that the exchange rate had an asymmetric effect on trade both in the short run and long run. All in all, the results in this study are industry-specific, indicating that the effects of both an appreciation and depreciation of the exchange rate on the bilateral trade balances vary across industries. Considering the J-curve effect identified in six cases, and greater trade elasticities following a depreciation, the government should advocate for expansionary monetary policy by lowering interest rates to improve the trade balance. , Thesis (MCom) -- Faculty of Business and Economic Sciences, School of Economics, Development and Tourism, 2024
- Full Text:
- Date Issued: 2024-04
- Authors: Kamwiyo, Craig
- Date: 2024-04
- Subjects: Foreign exchange rate , Foreign trade regulation -- Great Britain , Foreign trade regulation -- Germany , Commercial treaties
- Language: English
- Type: Master's theses , text
- Identifier: http://hdl.handle.net/10948/65086 , vital:74021
- Description: Brexit has given the United Kingdom greater autonomy over its international trade policies and as a result, there is a need to understand the dynamics around the effects of exchange rate on trade balances. Therefore, this study sought to investigate the effects of the pound to euro exchange rate on trade between the United Kingdom and Germany. In so doing, the study investigated the existence of the J-curve phenomenon in the bilateral trade balance. While most existing studies focus on aggregating the trade balance, this study considers disaggregating the trade balance at industrial level. Therefore, the disaggregated trade balance led to several unique studies catering for the twelve biggest industries that make up the trade balance. In addition, the study also does away with the assumption of linearity in the effects of exchange rate changes on the trade balance by making use of asymmetric analysis. For this purpose, the study uses the linear autoregressive distributed lag (ARDL) and the nonlinear autoregressive distributed lag (NARDL) models to analyse monthly data over the period of January 2010 to August 2022. The results provide evidence supporting the existence of the J-curve effect among linear ARDL and NARLD models. Furthermore, it was found that the exchange rate had an asymmetric effect on trade both in the short run and long run. All in all, the results in this study are industry-specific, indicating that the effects of both an appreciation and depreciation of the exchange rate on the bilateral trade balances vary across industries. Considering the J-curve effect identified in six cases, and greater trade elasticities following a depreciation, the government should advocate for expansionary monetary policy by lowering interest rates to improve the trade balance. , Thesis (MCom) -- Faculty of Business and Economic Sciences, School of Economics, Development and Tourism, 2024
- Full Text:
- Date Issued: 2024-04
The effects of real exchange rate misalignment on economic growth: a case study of Kenya
- Authors: Ndavi, Theresa Watwii
- Date: 2012
- Subjects: Foreign exchange rate , Foreign exchange market , Economic development
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:8985 , http://hdl.handle.net/10948/d1008109 , Foreign exchange rate , Foreign exchange market , Economic development
- Description: This paper investigates the effects of real exchange rate misalignment (REM) on economic growth in Kenya over the period 1964-2009. The real exchange rate misalignment is defined as the difference between the equilibrium exchange rate and the actual real exchange rate (RER). The equilibrium real exchange rate was obtained by using the purchasing power parity (PPP) approach. To this effect, the study examined the existence or absence of the cointegration between the REM and economic growth, using the autoregressive distributed lag (ARDL) bounds testing approach. The ARDL approach is employed to determine both the long-run and short-run dynamics of the model. The results suggest that no long-run relationship exists between economic growth and the REM in Kenya. The short-run model is then estimated, using the OLS (ordinary least squares) method. From this model, it is determined that trade openness has a positive impact on economic growth, while foreign aid has a negative impact on economic growth; and both are considered empirically significant. The inflation rate and REM both negatively impact economic growth, but are empirically insignificant. All variables corroborate the a priori expectations.
- Full Text:
- Date Issued: 2012
- Authors: Ndavi, Theresa Watwii
- Date: 2012
- Subjects: Foreign exchange rate , Foreign exchange market , Economic development
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:8985 , http://hdl.handle.net/10948/d1008109 , Foreign exchange rate , Foreign exchange market , Economic development
- Description: This paper investigates the effects of real exchange rate misalignment (REM) on economic growth in Kenya over the period 1964-2009. The real exchange rate misalignment is defined as the difference between the equilibrium exchange rate and the actual real exchange rate (RER). The equilibrium real exchange rate was obtained by using the purchasing power parity (PPP) approach. To this effect, the study examined the existence or absence of the cointegration between the REM and economic growth, using the autoregressive distributed lag (ARDL) bounds testing approach. The ARDL approach is employed to determine both the long-run and short-run dynamics of the model. The results suggest that no long-run relationship exists between economic growth and the REM in Kenya. The short-run model is then estimated, using the OLS (ordinary least squares) method. From this model, it is determined that trade openness has a positive impact on economic growth, while foreign aid has a negative impact on economic growth; and both are considered empirically significant. The inflation rate and REM both negatively impact economic growth, but are empirically insignificant. All variables corroborate the a priori expectations.
- Full Text:
- Date Issued: 2012
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