Modelling the Effects of Currency Exchange Rate Volatility on Philippine Balance of Trade Using Granger Causality Test
Background: Trade contributes to a nation's economic development, and the exchange rate indicates a country's trade competitiveness. This study investigates the potential for a bidirectional causal relationship between exchange rate volatility and trade balance in the Philippines. Methods...
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| Format: | Article |
| Language: | English |
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Center for Policy, Research and Development Studies
2025-06-01
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| Series: | Recoletos Multidisciplinary Research Journal |
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| Online Access: | https://rmrj.usjr.edu.ph/rmrj/index.php/RMRJ/article/view/2539 |
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| author | Charlotte Sarsaba Izon Garret Diano Jamaica Daro Catherine Gonzaga Karyme Ishe Pasulojan Mary Joy Teodosio Joey Estorosos |
| author_facet | Charlotte Sarsaba Izon Garret Diano Jamaica Daro Catherine Gonzaga Karyme Ishe Pasulojan Mary Joy Teodosio Joey Estorosos |
| author_sort | Charlotte Sarsaba |
| collection | DOAJ |
| description | Background: Trade contributes to a nation's economic development, and the exchange rate indicates a country's trade competitiveness. This study investigates the potential for a bidirectional causal relationship between exchange rate volatility and trade balance in the Philippines.
Methods: The study uses the Granger Causality Test to determine and ascertain whether there is a two-way causative relationship between exchange rate volatility and the balance of trade in the Philippines using the time series analysis considering the period from 1990–2023.
Results: The findings indicate that the balance of trade can influence and be a factor in the change and movement of exchange rate volatility due to factors such as the export-import of the country that reflects the demand and supply of currency, indicating that shifts in the trade balance can contribute to fluctuations in exchange rates. Exchange rate changes may be necessary to restore equilibrium in trade flows in response to shifts in the balance of trade, including improvements or deteriorations.
Conclusion: The study, therefore, recommends utilizing trade-related tactics to improve the trade balance by enhancing exports while cutting down unproductive and unprocessed imports, attracting more foreign investments and more exportation for exchange rate stability. |
| format | Article |
| id | doaj-art-0ed0d72cd14d43ed9eeea635ea26fe68 |
| institution | Kabale University |
| issn | 2423-1398 2408-3755 |
| language | English |
| publishDate | 2025-06-01 |
| publisher | Center for Policy, Research and Development Studies |
| record_format | Article |
| series | Recoletos Multidisciplinary Research Journal |
| spelling | doaj-art-0ed0d72cd14d43ed9eeea635ea26fe682025-08-20T03:32:55ZengCenter for Policy, Research and Development StudiesRecoletos Multidisciplinary Research Journal2423-13982408-37552025-06-0113122123010.32871/rmrj2513.01.18Modelling the Effects of Currency Exchange Rate Volatility on Philippine Balance of Trade Using Granger Causality TestCharlotte Sarsaba0https://orcid.org/0009-0000-9303-8988Izon Garret Diano1https://orcid.org/0009-0002-8396-6478Jamaica Daro2https://orcid.org/0009-0004-0672-8008Catherine Gonzaga3https://orcid.org/0009-0008-9571-8213Karyme Ishe Pasulojan4https://orcid.org/0009-0008-6647-212XMary Joy Teodosio5https://orcid.org/0000-0002-9437-1528Joey Estorosos6https://orcid.org/0000-0003-3130-6195School of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Arts and Sciences, University of San Jose-Recoletos, Cebu City, PhilippinesBackground: Trade contributes to a nation's economic development, and the exchange rate indicates a country's trade competitiveness. This study investigates the potential for a bidirectional causal relationship between exchange rate volatility and trade balance in the Philippines. Methods: The study uses the Granger Causality Test to determine and ascertain whether there is a two-way causative relationship between exchange rate volatility and the balance of trade in the Philippines using the time series analysis considering the period from 1990–2023. Results: The findings indicate that the balance of trade can influence and be a factor in the change and movement of exchange rate volatility due to factors such as the export-import of the country that reflects the demand and supply of currency, indicating that shifts in the trade balance can contribute to fluctuations in exchange rates. Exchange rate changes may be necessary to restore equilibrium in trade flows in response to shifts in the balance of trade, including improvements or deteriorations. Conclusion: The study, therefore, recommends utilizing trade-related tactics to improve the trade balance by enhancing exports while cutting down unproductive and unprocessed imports, attracting more foreign investments and more exportation for exchange rate stability.https://rmrj.usjr.edu.ph/rmrj/index.php/RMRJ/article/view/2539exchange rate volatilitybalance of tradegranger causality test |
| spellingShingle | Charlotte Sarsaba Izon Garret Diano Jamaica Daro Catherine Gonzaga Karyme Ishe Pasulojan Mary Joy Teodosio Joey Estorosos Modelling the Effects of Currency Exchange Rate Volatility on Philippine Balance of Trade Using Granger Causality Test Recoletos Multidisciplinary Research Journal exchange rate volatility balance of trade granger causality test |
| title | Modelling the Effects of Currency Exchange Rate Volatility on Philippine Balance of Trade Using Granger Causality Test |
| title_full | Modelling the Effects of Currency Exchange Rate Volatility on Philippine Balance of Trade Using Granger Causality Test |
| title_fullStr | Modelling the Effects of Currency Exchange Rate Volatility on Philippine Balance of Trade Using Granger Causality Test |
| title_full_unstemmed | Modelling the Effects of Currency Exchange Rate Volatility on Philippine Balance of Trade Using Granger Causality Test |
| title_short | Modelling the Effects of Currency Exchange Rate Volatility on Philippine Balance of Trade Using Granger Causality Test |
| title_sort | modelling the effects of currency exchange rate volatility on philippine balance of trade using granger causality test |
| topic | exchange rate volatility balance of trade granger causality test |
| url | https://rmrj.usjr.edu.ph/rmrj/index.php/RMRJ/article/view/2539 |
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