| This study examined the impact of exchange rate fluctuations on the level of international trade between Malaysia and China using 45 observations spanning from 2010 quarter 1 to 2021 quarter 1. |
| This study examined the impact of exchange rate fluctuations on the level of international trade between Malaysia and China using 45 observations spanning from 2010 quarter 1 to 2021 quarter 1. The Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model was adopted to compute the exchange rate fluctuations. International trade between Malaysia and China was selected in this study as, since 2009, China has consistently been Malaysia's top trading partner. Besides, to produce precise output, this study employed two models: the export and import models. The empirical results, derived from Autoregressive Distributed Lag (ARDL) modelling, suggested that exchange rate fluctuations had a negative but statistically insignificant impact on exports. In contrast, exchange rate fluctuations had a positive and statistically significant impact on imports. This result implied that importers from Malaysia were generally risk-takers, as they tended to trade significantly during periods of high exchange rate fluctuation. However, to avoid losses for both exporters and importers due to exchange rate fluctuations, policymakers from both countries should ensure that facilities for exchange rate hedging become more convenient and straightforward for traders so that international trade continues to bloom for both countries. |
