Koi Nyen Wong

The effects of exchange rate variability on Malaysia's disaggregated electrical exports

Purpose - This paper aims to examine the influence of exchange rate variability on the demand for Malaysias top five electrical exports as classified by Standard International Trade Classification (SITC) product groups. Design/methodology/approach - The autoregressive distributed lag (ARDL) modelling approach to co-integration is employed in order to estimate the influence of exchange rate variability on export demand. Findings - The empirical results indicate that foreign income and prices are important determinants of export demand for all of the five electrical exports, in both the long run and the short run, over the sample period 1990-2001. More interestingly, this paper supports the view that exchange rate variability has an adverse effect on Malaysias electrical exports. Research limitations/implications - One limitation of the study is the appropriateness of the ARDL modelling approach to examine the influence of exchange rate variability (which is stationary, Practical implications - This paper is important to policymakers for the design of both exchange rate and trade policies in order to promote export growth, which could lead to Malaysias transition towards high-technology industrialisation. Originality/value - This paper examines the influence of exchange rate variability on the demand for Malaysias top five electrical exports as classified by SITC product groups, information which is not available in the existing literature.

Exchange rate variability and the export demand for Malaysia's semiconductors: an empirical study

This article examines the effects of exchange rate variability on export demand for semiconductors, which is the largest sub-sector of electronics industry in Malaysia as reported by Malaysian Industrial Development Authority (MIDA, 2004). The empirical results, which are estimated based on the Johansens multivariate cointegration tests and error-correction model, suggest that there is a unique long-run relationship among quantities of export, relative price, real foreign income and real exchange rate variability. The major finding of this article is that the variability of real exchange rate has some effect on semiconductor exports in both the long run and the short run. In the light of rapid advances in technology in the global markets for electronics products, the findings are useful to policy makers for the design and target of appropriate exchange rate and industrial policies to enhance the export competitiveness of semiconductor industry.

FOREIGN DIRECT INVESTMENT AND SERVICES TRADE: EVIDENCE FROM MALAYSIA AND SINGAPORE

Abstract Services trade is an important source of growth in Malaysia and Singapore. Both economies are export-oriented and actively court foreign direct investment (FDI) to advance their economic objectives of industrialization and economic development. This paper examines the causal linkages between inward FDI and the countrys engagement in services trade in bi-variate and tri-variate VAR frameworks. The empirical findings for Singapore show evidence of bi-directional causality between inward FDI and the total trade volume in services (i.e. the absolute sum of payments and receipts) as well as between FDI and services imports (in the tri-variate specification). This may reflect her relative open foreign investment policy and free trade regime in services. For Malaysia, the evidence of causality is weaker and uni-directional, from inward FDI to services imports. These findings are consistent with the different stages of economic development and openness attained by the two sample countries, and they provide useful background for trade and foreign investment policies and development strategies.

Foreign direct investment and employment in manufacturing and services sectors: Fresh empirical evidence from Singapore

Purpose - This paper aims to examine both the cointegrating and causal relationships among inward FDI and the host countrys employment in manufacturing and services sectors. Design/methodology/approach - This paper applies autoregressive distributed lag (ARDL) framework to test the cointegration and causality patterns using Singapore as a case. Findings - Apart from the presence of a unique long-run relationship, the findings also show evidence of long-run causality, running from employment in manufacturing and services to FDI inflows, and from FDI inflows and services employment to manufacturing employment. Furthermore, there is evidence of short-run causality showing strong FDI-employment and employment linkages, predominantly from the manufacturing to services. Research limitations/implications - One likely area of future research is to extend this paper by using disaggregated data, e.g. FDI inflows by sector (manufacturing and services), and employment by the respective sectors. Practical implications - Manufacturing and services have been regarded as the “twin engines” of growth for the Singapore economy. As the economy is moving up the value chain from downstream to upstream activities, a significant proportion of foreign direct investment (FDI) has been attracted to the manufacturing and services sectors. The present study provides useful policy implications towards promoting foreign investment in emerging areas of and manpower development in both sectors of the economy. Originality/value - This paper explores the possible interactions between FDI inflows and employment in manufacturing and services sectors as well as the employment linkages between manufacturing and services in Singapore.

Foreign Direct Investment, Merchandise and Services Trade in a Transition Economy: The Case of Cambodia

Since the liberalization of trade and investment in the 1990s, inward foreign direct investment (FDI) has been seen to play a greater role in forging trade flows, integration into the regional and international markets and economic development for a transition economy such as Cambodia. Despite her recent progress in attracting FDI and fostering trade, the direction of causality between inward FDI, exports and imports of merchandise as well as services has not been empirically explored. The findings show that inward FDI not only can promote both merchandise and services exports but also indicate the presence of backward and forward linkages, which could result in positive externalities. However, based on the impulse response analysis, it seems that merchandise exports are more vulnerable than services exports to an unanticipated shift in FDI inflows in the medium run.

Tourism and openness to trade in Singapore: evidence using aggregate and country-level data.

Tourism has been identified as one of the key growth sectors in Singapores economy. Given that the city state has been recognized as one of the most open economies in the world, this study explores the causality relationships between tourism and openness to trade, using aggregated variables – total visitor arrivals and data on trade components (merchandise and services) – and their respective disaggregated data by country for each of Singapores top five trading partners – Malaysia, China, the USA, Japan and South Korea. The study shows bidirectional causality between international visitor arrivals in Singapore and openness to merchandise trade. However, the causality pattern varies among Singapores major trading partners if country-level data are used. The overall findings imply that further trade liberalization with Singapores major trading partners may not necessarily encourage visitor arrivals from those countries, but can be seen as an important catalyst for the growth and development of the tourism sector. Conversely, an increase in tourism activities could also encourage the host country to open itself to more international trade. Furthermore, it is imperative to liberalize the service sector in Singapore to facilitate greater openness in merchandise trade, given that a large proportion of services constitutes the goods trade.

Research Note: The SARS Epidemic and International Visitor Arrivals to Cambodia: Is the Impact Permanent or Transitory?:

This study contributes to the existing literature by examining whether the SARS (severe acute respiratory syndrome) health scares had a permanent or transitory effect on tourist arrivals in a transition economy – Cambodia. The findings, which are based on unit root tests with an unknown level shift proposed by Lanne et al (2002) and Saikkonen and Lütkepohl (2002), show that visitor arrivals from Cambodias major source markets are stationary. This implies that the SARS crisis had a transitory effect on Cambodia.