Export Promotion through Exchange Rate Policy: Exchange Rate Depreciation or Stabilization?

Exchange rate movements affect exports in two ways -- its depreciation and its variability (risk). A depreciation raises exports, but the associated exchange rate risk could offset that positive effect. The present paper investigates the net effect for eight Asian countries using a dynamic conditional correlation bivariate GARCH-M model that simultaneously estimates time varying correlation and exchange rate risk. Depreciation encourages exports, as expected, for most countries, but its contribution to export growth is weak. Exchange rate risk contributes to export growth in Malaysia and the Philippines, leading to positive net effects. Exchange rate risk generates a negative effect for six of the countries, resulting in a negative net effect in Indonesia, Japan, Singapore, Taiwan and a zero net effect in Korea and Thailand. Since the negative effect of exchange rate risk may offset, or even dominate, positive contributions from depreciation, policy makers need to reduce exchange rate fluctuation along with and possibly before efforts to depreciate the currency.

Chemistry of particles from the Toba ash layer

Two cores from the southern South China Sea contain discrete ash layers that mainly consist of rhyolithic glass shards. On the basis of the SPECMAP time scale, the ash layers were dated to ca. 74 ka, the age of the youngest Toba eruption in northern Sumatra. This link is supported by the chemical composition of the glass, which is distinct from volcanic glass supplied from the Philippines and the northern South China Sea, but is almost identical with the chemistry of the Toba ash. The youngest Toba ash layers in the South China Sea expand the previously known ash-fall zone over more than 1800 km to the east. The dispersal of ashes from Sumatra in both western and eastern directions indicates two contrasting wind directions and suggests that (1) the Toba eruption probably happened during the Southeast Asian summer monsoon season, and (2) the volume of erupted magma was larger than previously interpreted.