Date of Award

12-1998

Degree Type

Thesis

Degree Name

Master of Philosophy (MPHIL)

First Advisor

Dr. Jimmy Ran

Second Advisor

Dr. Kui-yin Cheung

Third Advisor

Dr. Kai-cheong Lei

Abstract

Since the collapse of the Bretton Woods system and the advent of the floating exchange rate regime in the spring of 1973, there has been a great concern over the volatility of exchange rate and its impacts on the volume of international trade. This paper aims at examining whether the volatility of exchange rate hampers Hong Kong’s domestic exports. In this paper, I use the quarterly data from the first quarter of 1984 to the third quarter of 1997 and select five major trading partner countries of Hong Kong to reflect three diverse regions: North American, Europe and the Pacific Basin. These countries are the United States, Germany, the United Kingdom, Japan and Taiwan. Most previous studies focused on the relationship between the exchange rate volatility and the total (aggregate) trade flows, this paper, however, adds to the existing literature by my investigation into the relationship between exchange rate volatility and the disaggregate trade flows. The Autoregressive Conditional Heteroskedasticity (ARCH) model is employed to generate the volatility of exchange rate. The volatility is well-known to be associated with risk. But does this volatility risk significantly matter? The empirical results of my investigation show that the exchange rate volatility does not hamper Hong Kong’s total (aggregate) to the United States, Germany, the United Kingdom, Japan and Taiwan from the first quarter of 1984 to the third quarter of 1997. However, I find that the volatility of exchange rate has exerted a negative and statistically significant impact on the quantity of Hong Kong's disaggregate domestic exports 77121 and 89332 to the United Kingdom. For other twenty-three out of twenty-five cases, the volatility of exchange rate does not have a negative and statistically significant effect on the quantity of Hong Kong's disaggregate domestic exports to the United States, Germany, the United Kingdom, Japan and Taiwan from the first quarter of 1984 to the third quarter of 1997.

Language

English

Recommended Citation

Leung, C. Y. B. (1998). Does the volatility of exchange rate hamper Hong Kong's domestic exports? (Master's thesis, Lingnan University, Hong Kong). Retrieved from https://commons.ln.edu.hk/otd/110

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