Exchange rate, macroeconomic fundamentals and international trade

Abstract

This paper aims to investigate significant relation between exchange rates, macroeconomic fundamentals and international trade of a group of Asian countries from 1980 to 2009. International trade is imperative to the progress of developing countries to induce investments and earn foreign exchange in this liberalized and globalized borderless world. Regression analyses reveal that market size and exchange rate play very important function in the promotion of international trade. Growth in population has significant negative effects on developed nations: Japan and Singapore, but has positive effects on the Philippines. Additionally, inflation rate affects the Philippines and India negatively, while financial market development is only marginally significant on total trade of Singapore and India. Results from the study present policy implications to emerging and developed Asian countries on strategies to facilitate international trade and enhance growth.