Despite the vast research on the exchange rate
and trade, little is known
about the perspective of Malaysia, especially on export of agricultural
commodities. In the current situation, Malaysia is experiencing a
depreciation of the ringgit over a short-term period. Therefore, the demand
for trade is likely to change correspondingly. Theoretically, several major
factors affect the movement of export volumes; one of them is a country’s
exchange rate. Hence, the objective of this study is to investigate the effect
of exchange rate on the export of palm oil from Malaysia to its major
trading partners. The gravity model was estimated using a panel data set
for the bilateral export of palm oil, where empirical findings revealed a
negative and significant effect of the exchange rate on the export of palm
oil. It means that any depreciation in the Malaysian Ringgit will lead to
lower exports of this commodity.
Keywords: palm oil, export, exchange rate, gravity model.