Impact of exchange rate volatility on the export of thailand’s key agricultural commodities to asean countries

Abstract

The key export markets of Thai agricultural commodities have recently shifted from China, the United States, and Japan to ASEAN countries. Nonetheless, exporters unavoidably encounter problems from exchange rate volatility. The question is to what extent does exchange rate volatility impact the export value of Thai agricultural commodities to the ASEAN market. To address this question, in the present study calculations were performed of exchange rate volatility based on a moving sample standard deviation of the percentage real effective exchange rate. Also, estimations were made of the dynamic relationship between the export of agricultural commodities and exchange rate volatility based on the Johansen co-integration test and error correction model. The significant findings are as follows: exchange rate volatility has a relation in the long run with most of the exports of agricultural commodities from Thailand to the ASEAN market. Furthermore, exchange rate volatility has an impact on the export of Thai agricultural commodities to the different markets in the ASEAN region, but with a variable direction of impact. For most exporters of Thai agricultural commodities, this is likely to have a positive impact because most exporters are small and medium-sized enterprises who might have an inadequate understanding of techniques for hedging foreign exchange risks and thus are more willing to face the risks in order to maintain their market share in the high potential ASEAN market. © 2021 Kasetsart University.