Asymmetric Effects of Trade Openness on Malaysian Fish Trade Balance
DOI:
https://doi.org/10.33736/ijbs.4600.2022Keywords:
Fishery, Malaysia, NARDL, Trade Balance, Trade OpennessAbstract
Although Malaysia is a small open economy surrounded by the ocean, it still experiences a critical fish trade deficit. This study examines the nonlinear effects of trade openness on Malaysian fish trade balance from 1976 to 2016, using the Nonlinear Autoregressive Distributed Lag (NARDL) approach. The other independent variables applied in the model are the exchange rate and domestic income. Findings show that the variables are cointegrated. In the long-run, positive change in trade openness has a significant negative effect on the trade balance. The emphasis of the study is also placed on shreds of evidence of the long-run and short-run asymmetric effects of trade openness. Domestic income and depreciation of the exchange rate offer significant positive impacts on the trade balance. In the short-run, all the variables yield an opposite effect. The outcome of the exchange rate supports the J-curve effect and the Marshall-Lerner condition. This research may help the policymakers and traders to have a better understanding of the sector and thus develop suitable long-term strategies to improve the fish trade balance.
References
Ahad, M. (2017). Impact of financial development on trade balance: An ARDL cointegration and causality approach for Pakistan. Global Business Review, 18(5), 1199-1214. https://doi.org/10.1177/0972150917710152
Alexander, S. S. (1952). Effects of a devaluation on a trade balance. International Monetary Fund Staf Papers, 2(2), 263-278. https://doi.org/10.2307/3866218
Alshubiri, F., Elheddad, M., & Doytch, N. (2020). The impact of fish production on marine trade balance and foreign direct investment: An empirical study of the GCC economies. Marine Policy, 116, 103660. https://doi.org/10.1016/j.marpol.2019.103660
Anh, V. T., & Duc, V. H. (2016). Trade balance and exchange rate in Thailand & the implications for Vietnam: An application using instrumental variable and the heterogeneous panel cointegration methods. Journal of Economic Development, 23(1), 137-160. https://doi.org/10.24311/jed/2016.23.1.04
Asche, F. (2014). Exchange rates and the seafood trade. In GLOBEFISH research programme (vol. 113). Rome: FAO.
Asche, F., Bellemare, M. F., Roheim, C., Smith, M. D., & Tveteras, S. (2015). Fair Enough? Food Security and the International Trade of Seafood. World Development, 67, 151-160. https://doi.org/10.1016/j.worlddev.2014.10.013
Asif, K. (2014). Determinants of trade balance: A comparison between Pakistan and India. Business Review , 9(1), 33-46. https://doi.org/10.54784/1990-6587.1226
Atici, C. (2012). Carbon emissions, trade liberalization, and the Japan-ASEAN interaction: A group-wise examination. Journal of the Japanese and International Economies, 26(1), 167-178. https://doi.org/10.1016/j.jjie.2011.07.006
Bahmani-Oskooee, M. (1985). Devaluation and the J-curve: Some evidence from LDCs. The Review of Economics and Statistics, 67(3), 500-504. https://doi.org/10.2307/1925980
Bahmani-Oskooee, M., & Fariditavana, H. (2015). Nonlinear ARDL approach, asymmetric effects and the J-curve. Journal of Economic Studies, 42(3), 519-530. https://doi.org/10.1108/JES-03-2015-0042
Bahmani-Oskooee, M., & Kanitpong, T. (2017). Do exchange rate changes have symmetric or asymmetric effects on the trade balances of Asian countries? Applied Economics, 49(46), 4668-4678. https://doi.org/10.1080/00036846.2017.1287867
Barattieri, A. (2016). Asymmetric Trade Liberalizations and Current Account Dynamics. A Dynamic Economic and Monetary Union (ADEMU) Working Paper No. 2016/018. Retrieved from www.ademu-project.eu/publications/working-papers
Bardakas, I. C. (2013). The asymmetric effect of income on import demand in Greece. In Bank of Greece printing works (no. 159). Retrieved from https://www.researchgate.net/profile/Ioanna_Bardakas/publication/263443065_The_asymmetric_effect_of_income_on_import_demand_in_Greece/links/0c96053ad6fc5c125d000000.pdf
Bayramoglu, B., & Jacques, J.-F. (2012). Fishery Resources and Trade Openness: Evidence from Turkey. Institut National de la Recherche Agronomique (INRA) Working Paper Series No. 2012/02. https://www6.versailles-grignon.inrae.fr/economie_publique/content/download/3184/33595/version/1/file/2012_02.pdf
Bernard, A. B., Eaton, J., Jensen, J. B., & Kortum, S. (2003). Plants and productivity in international trade. American Economic Review, 93(4), 1268-1290. https://doi.org/10.1257/000282803769206296
Bhat, J. A., & Sharma, N. K. (2018). The twin-deficit hypothesis: Revisiting Indian economy in a nonlinear framework. Journal of Financial Economic Policy, 10(3), 386-405. https://doi.org/10.1108/JFEP-09-2017-0082
Bouzas, R., & Keifman, S. (2003). Making trade liberalization work. In After the Washington consensus: Restarting growth and reform in Latin America. Washington: Institute for International Economics.
Chaudhary, M. A., & Amin, B. (2012). Impact of trade openness on exports growth, imports growth and trade balance of Pakistan. Forman Journal of Economic Studies, 8, 63-81.
Chiu, Y. B., & Ren, R. (2019). Trade balance, savings rate, and real exchange rate: Evidence from China and its trading partners. Emerging Markets Finance and Trade, 55(2), 351-364. https://doi.org/10.1080/1540496X.2018.1431882
Coxhead, I. (2007). A new resource curse? Impacts of China's boom on comparative advantage and resource dependence in Southeast Asia. World Development, 35(7), 1099-1119. https://doi.org/10.1016/j.worlddev.2006.10.012
Dar, A., & Amirkhalkhali, S. (2003). On the impact of trade openness on growth: Further evidence from OECD countries. Applied Economics, 35(16), 1761-1766. https://doi.org/10.1080/0003684032000129020
Department of Fisheries Malaysia. (2020). Act and Regulations. Retrieved April 17, 2020, from https://www.dof.gov.my/index.php/pages/view/218
Department of Statistics Malaysia. (2018). Selected Agricultural Indicators, Malaysia, 2018. Retrieved September 3, 2019, from https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=72&bul_id=UjYxeDNkZ0xOUjhFeHpna20wUUJOUT09&menu_id=Z0VTZGU1UHBUT1VJMFlpaXRRR0xpdz09
Duasa, J. (2007). Determinants of Malaysian trade balance: An ARDL bound testing approach. Global Economic Review, 36(1), 89-102. https://doi.org/10.1080/12265080701217405
Erhardt, T. (2018). Does trade openness cause overfishing? Journal of the Association of Environmental and Resource Economists, 5(4), 695-711. https://doi.org/10.1086/698362
Federal Agricultural Marketing Authority. (2021). Guidelines For Exporting Processed and Fresh Agricultural Food Products. Retrieved February 17, 2021, from http://www.fama.gov.my/en/panduan-pengeksportan-produk-pertanian-makanan-proses
Federal Reserve Bank of St. Louis (FRED). (2019). Malaysia / U.S. Foreign Exchange Rate. Retrieved September 2, 2019, from https://fred.stlouisfed.org/series/AEXMAUS
Food and Agriculture Organization (FAO). (2018). The State of World Fisheries and Aquaculture 2018- Meeting the Sustainable Development Goals. Rome: FAO.
Food and Agriculture Organization Fishery Statistics (FishStat). (2019). Time-series Query On: Commodity Trade and Production. Retrieved August 24, 2019, from http://www.fao.org/figis/servlet/SQServlet?file=/usr/local/tomcat/8.5.16/figis/webapps/figis/temp/hqp_7961963351507569548.xml&outtype=html
Frenkel, J. A., Gylfason, T., & Helliwell, J. F. (1980). A synthesis of monetary and Keynesian approaches to short-run balance-of-payments theory. The Economic Journal, 90(359), 582-592. https://doi.org/10.2307/2231928
Friedman, M. (1957). Introduction to a theory of the consumption function. In A theory of the consumption function. New Jersey: Princeton University Press. https://doi.org/10.1515/9780691188485
Gani, A. (2017). The logistics performance effect in international trade. Asian Journal of Shipping and Logistics, 33(4), 279-288. https://doi.org/10.1016/j.ajsl.2017.12.012
Ghani, G. M. (2009). The impact of trade liberalization on developing countries' trade balances with industrial and developing countries: An econometric study. International Journal of Business and Society, 10(2), 53-64.
Global Economy. (2019). Malaysia Trade Openness. Retrieved August 18, 2019, from https://www.theglobaleconomy.com/Malaysia/trade_openness/
Gong, L., & Kinnucan, H. W. (2015). Effects of recession and dollar weakening on the U.S. agricultural trade balance. Southern Agricultural Economics Association (SAEA) Annual Meeting, 1-34. Atlanta, Georgia.
Guechari, Y. (2012). An empirical study on the effects of real effective exchange rate on Algeria's trade balance. International Journal of Financial Research, 3(4), 102-115. https://doi.org/10.5430/ijfr.v3n4p102
Hannesson, R. (2001). Effects of Liberalizing Trade in Fish, Fishing Services and Investment in Fishing Vessels. Bergen: OECD.
Har, W. M., Lee, T. H., Chew, K. M., & Goh, H. S. (2014). Validity of Marshal Lerner hypothesis: An empirical study on Malaysia-United States trade balance. Asian Research Journal of Business Management, 1(3), 18-26.
Hassan, M. S., Wajid, A., & Kalim, R. (2017). Factors affecting trade deficit in Pakistan, India and Bangladesh. Economia Politica, 34(2), 283-304. https://doi.org/10.1007/s40888-017-0053-7
Idris, J., Zulkornain Y., Habibullah, M. S., & Chin, L. (2018). Openness and economic growth in developing and OECD countries. International Journal of Economics and Management, 12(2), 693-702.
International Trade Centre. (2019). List of Importing Markets For A Product Exported by Malaysia | Product: 03 Fish And Crustaceans, Molluscs And Other Aquatic Invertebrates. Retrieved May 1, 2020, from https://www.trademap.org/Country_SelProductCountry_TS.aspx?nvpm=1%7C458%7C%7C%7C%7C03%7C%7C%7C2%7C1%7C1%7C2%7C2%7C1%7C2%7C1%7C1%7C1
Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. London: Macmillan.
Khan, M. A., Jaffri, A. A., Abbas, F., & Haider, A. (2017). Does trade liberalization improve trade balance in Pakistan? South Asia Economic Journal, 18(2), 158-183. https://doi.org/10.1177/1391561417713128
Koen, V., Asada, H., Nixon, S., Rahuman, M. R. H., & Arif, A. Z. M. (2017). Malaysia's Economic Success Story and Challenges. OECD Economics Department Working Papers No. 1369.
Krueger, A. O. (1985). The experience and lessons of Asia's super exporters. In Export-oriented development strategies: The success of five newly industrializing countries. Boulder: Westview Press.
Kyophilavong, P., Shahbaz, M., Rehman, I. U., Souksavath, S., & Chanthasene, S. (2018). Investigating the relationship between trade balance and the exchange rate: The case of Laos' trade with Thailand. Global Business Review, 19(3), 590-603. https://doi.org/10.1177/0972150917713869
Lee, C., & Law, C. H. (2013). The effects of trade openness on Malaysian exchange rate. International Economic and Finance Journal, 8(1), 25-39.
Li, K. (1997). The Effect and Strategy of China's Trade Liberalization. Tokyo: Institute of Developing Economies.
Macdougall, G. D. A. (1952). British and American exports: A study suggested by the theory of comparative costs. part II. The Economic Journal, 62(247), 487-521. https://doi.org/10.2307/2226897
Myint, H. (1977). Adam Smith's theory of international trade in the perspective of economic development. Economica, 44(175), 231-248. https://doi.org/10.2307/2553648
Ng, Y. L., Har, W. M., & Tan, G. M. (2008). Real exchange rate and trade balance relationship: An empirical study on Malaysia. International Journal of Business and Management, 3(8), 130-137. https://doi.org/10.5539/ijbm.v3n8p130
Okamoto, Y. (1994). Impact of trade and FDI liberalization policies on the Malaysian economy. The Developing Economies, 32(4), 460-478. https://doi.org/10.1111/j.1746-1049.1994.tb01050.x
Organisation for Economic Co-operation and Development (OECD)/FAO. (2017). OECD-FAO Agricultural Outlook 2017-2026. Paris: OECD.
Ousseini, A. M., Hu, X., & Aboubacar, B. (2017). WAEMU trade and current account balance deficit analysis: A panel VAR approach. Theoretical Economics Letters, 7, 834-861. https://doi.org/10.4236/tel.2017.74060
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616
Phan, T. H., & Jeong, J. Y. (2015). Vietnam trade balance and exchange rate: Evidence from panel data analysis. Journal of Applied Economics & Business Research, 5(4), 220-232.
Ricardo, D. (1817). On the Principles of Political Economy and Taxation. London: John Murray.
Rose, A. K., & Yellen, J. L. (1989). Is there a J-curve? Journal of Monetary Economics, 24(1), 53-68. https://doi.org/10.1016/0304-3932(89)90016-0
Sastre, L. (2005). An Alternative Model for the Trade Balance of Countries with Open Economies: The Spanish Case. Madrid: Department of Economic Analysis (UNED).
Sharif, M. N., & Ali, A. Y. S. (2016). Determinants of trade balance in Somalia: Regression analysis using time series data. Journal of Economics and Sustainable Development, 7(12), 62-71.
Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. In W. Horrace, & R. Sickles (Eds.), The festschrift in honor of Peter Schmidt.: Econometric methods and applications. New York: Springer. https://doi.org/10.1007/978-1-4899-8008-3_9
Sivrikaya, A., & Ongan, S. (2019). BREXIT and the J-Curve hypothesis for the UK: A nonlinear ARDL approach. Sosyoekonomi, 27(40), 229-239. https://doi.org/10.17233/sosyoekonomi.2019.02.14
Soh, B. H., & Lim, G. T. (2020). Macroeconomic variables affecting the fish trade balance in Malaysia. Journal of Economics and Sustainability (JES), 2(2), 52-62. https://doi.org/10.32890/jes2020.2.2.5
Soh, B. H., Lim, G.-T., & Chua, S. Y. (2021). Competitiveness of Malaysian fisheries exports: A constant market share analysis. Malaysian Journal of Economic Studies, 58(2), 175-198. https://doi.org/10.22452/MJES.vol58no2.1
Soleymani, A., & Chua, S. Y. (2014). How responsive are trade flows between Malaysia and China to the exchange rate? Evidence from industry data. International Review of Applied Economics, 28(2), 191-209. https://doi.org/10.1080/02692171.2013.858666
Tufail, M. K., Anwar, S., Raza, S. H., & Abbas, K. (2014). Effect of budget deficit on trade deficit in Pakistan (A time series analysis). Journal of Finance and Economics, 2(5), 145-148. https://doi.org/10.12691/jfe-2-5-2
Tveterås, S., & Asche, F. (2008). International fish trade and exchange rates: An application to the trade with salmon and fishmeal. Applied Economics, 40(13), 1745-1755. https://doi.org/10.1080/00036840600905134
Waliullah, Kakar, M. K., Kakar, R., & Khan, W. (2010). The determinants of Pakistan's trade balance: An ARDL cointegration approach. The Lahore Journal of Economics, 15(1), 1-26. https://doi.org/10.35536/lje.2010.v15.i1.a1
World Bank. (2019a). GDP Per Capita (Constant 2010 US$) | Data. Retrieved September 3, 2019, from https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?locations=MY-US
World Bank. (2019b). Trade (% of GDP) | Data. Retrieved September 3, 2019, from https://data.worldbank.org/indicator/NE.TRD.GNFS.ZS?locations=MY
Yusoff, F. M., & Arshad, A. (2017). Asian-Pacific Aquaculture 2017 - Meeting Abstract. Retrieved July 20, 2019, from https://www.was.org/meetings/ShowAbstract.aspx?Id=48169
Downloads
Published
How to Cite
Issue
Section
License
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.
