Exchange Rate and Foreign Trade: A Comparative Study of Major South Asian and South-East Asian Countries

The main purpose of this study is to examine the relationship of exchange rate with exports and imports of major South-Asian and Southeast Asian Economies. The Autoregressive Distributed Lag (ARDL) approach to co-integration and error correction model is employed to investigate the long run and short run relationship between the variables in sample economies over the period of 1979-2010. The results show that the long run relationship between exchange rate and exports exists in more than half of the sample countries; however, the relationship between exchange rate and imports is found only in one sample country. Moreover, the significant short run relationship between the variables is not found in majority of the sample countries.