B U L E T I N Ş T I I N Ţ I F I C Nr. 1 (37) 2014 INFLUENCES OF EXCHANGE RATES ON ROMANIAN EXPORTS Luis­Raul BOROACĂ [email protected] Cristina ANTTILA [email protected] “ALMA MATER” UNIVERSITY, SIBIU, ROMANIA ABSTRACT Exports represent a major component of gross domestic product. In a more and more globalized world, the importance of export activity increased. Export depends on a large variety of factors that can have a positive or negative effect on it. Some consider that exchange rates are a factor that can influence the dynamics of exports. In this paper, the author presented different points of view on the topic of the correlation between exchange rates and export. The author analyzed the possible influence of exchange rates on Romanian exports. The period took into consideration for the research is 1990- 2012. Keywords Export, exchange rate, currency, depreciation The aim of this paper is to present the way in which the rate of exchange influenced 1. Introduction the evolution of Romanian exports, during International trade is a more and more 1990-2012. In order to realize this aim, the significant part of economic activity of most author of the paper started by presenting countries. theoretical approaches concerning the matter In order to find out which is the influence of the influence of exchange rates on exports. of international trade on the economic growth In the study on the influence of the rate of a country, one should take into of exchange on Romanian exports, the author consideration two important aspects: export, considered two main periods of time, 1990- which is the activity of selling products 1998 and 1999-2012. This division of time abroad; import, which is the activity of was based on the consideration that, on 1 buying products from abroad. January 1999, the euro replaced the ECU (i.e. 5 B U L E T I N Ş T I I N Ţ I F I C Nr. 1 (37) 2014 European Currency Unit), at the value €1 = 1 If export surpasses import, the trade ECU. balance of the country will have a surplus. If import surpasses exports, the balance of trade 2. Theoretical Influences of Exchange will have a deficit, which is generally Rates on Exports perceived as a negative situation [3]. There are different points of view on the The modification of exchange rates may matter of exports in correlation with cause a profit or loss to firms that export their exchange rates. One may say that there are products. certain correlations on both sides. Therefore, In international trade, if the currency in exchange rates may influence the dynamics which the exporter is paid appreciates of export, and exports may influence the (between the moment of product selling and evolution of exchange rate. the moment of receiving the counter value of The exchange rate is the price of the those products), the exporter will have a currency of a country expressed in the profit, due to the dynamics of the exchange currency of another country [1]. rate. Economists consider that the dynamics When the currency in which the exporter of exchange rates can have a significant is paid depreciates, the exporter may have a impact on the exports of a country. A weaker loss. domestic currency of a country can stimulate Some authors point out the fact that exports from that country: exporters are more exchange rates can be used to stimulate competitive on foreign markets, because their export. Therefore, a country can devalue its goods and services are cheaper for abroad currency in order to stimulate exports or to buyers [2]. dampen imports [4]. When domestic currency is stronger, exporters lose their commercial competitive 3. Influences of Exchange Rates on advantage, because their products will cost Romanian Exports during 1990-1998 too much for abroad clients. On the other During 1990-1998, ECU was used as a hand, a stronger domestic currency of a unit of account of the European Community. country may stimulate imports in that country: Therefore, the statistical data used by the importers can bring cheaper products from author for this period of time (1990-1998) is abroad. Euro/ECU. Exports are an important indicator for In Table no. 1, there are the statistical the international trade of a country. The data concerning the annual rates of exchange dynamics of export has a major effect on the and the Romanian exports during 1990-1998. trade balance of a country. Table no. 1 Exchange Rates and Romanian Exports in 1990-1998 Euro/ECU Exchange Rates – Exports of Goods and Services Year Annual Data [Romanian leu] [Millions of euro] 1990 0.0046 3,101.8 1991 0.0145 2,668.7 1992 0.0674 2,487.1 1993 0.0886 5,205.9 1994 0.1972 6,286.5 6 B U L E T I N Ş T I I N Ţ I F I C Nr. 1 (37) 2014 1995 0.2662 7,328.1 1996 0.3922 7,682.2 1997 0.8108 8,867.7 1998 0.9985 8,530.4 Data source: Eurostat [5] Data table: author’s own processing As shown in Table no. 1, the exchange In 1993-1996, both exchange rates and rates of ECU/Euro had an upward trend exports had an upward trend. During during 1990-1998. On the hand, in the same 19971998, exports of goods and services period of time, Romanian exports of goods decreased, in spite of the fact that the and services had a variable dynamics. During exchange rates increased. 1990-1992, in spite of the upward trend of the In Figure no. 1, there is a graphic exchange rates, Romanian exports had a representation of the dynamics of exchange downward trend. rates and Romanian exports during 1990- 1998. Figure no. 1 Dynamics of Exchange Rates and Romanian Exports in 1990-1998 Using statistical software (i.e. Microsoft Data source: Eurostat [5] Excel), the author obtained the information in Data graph: author’s own processing Table no. 2. As shown in Figure no. 1, in spite of the The coefficient of determination “R variable dynamics of Romanian exports, Square” shows the proportion in the during 1990-1998, both exchange rates and variation of the dependent variable Y exports have upward overall trends in that (around its mean Y-bar) that depends on the period of time. Therefore, one may suspect independent variable X. As shown in Table that there was a connection between the no. 2, R Square is 0.7077. It means that dynamics of exchange rates and the 70.77% of the variation of the dependent evolution of exports. variable Y around its mean is explained by 7 B U L E T I N Ş T I I N Ţ I F I C Nr. 1 (37) 2014 the independent variable X. In this case, Y P-value (Table no. 2) is called stands for Romanian exports during 1990- “probability value” or “marginal significance 1998, and X stands for exchange rates during level”. Given a P-value, one can tell at a 1990-1998. glance whether the null hypothesis of a zero Multiple R (i.e. square root of R Square) coefficient is rejected or accepted. For shows the correlation between Y and Y-hat example, if one is performing a test at the 5 (i.e. the predicted average Y value for a given % significance level a P-value lower than X, found by using the regression equation). 0.05 is taken as evidence to reject the null As given in Table no. 2, Multiple R is 0.8412. hypothesis of a zero coefficient. It means that the correlation between Y and Significance F (see Table no. 2) is the P- Y-hat is of 84.12 %. In this case, Y stands for value (or the marginal significance level) of Romanian exports during 1990-1998. the F-test. The F-test (see “F” in Table no. 2) is a test of the hypothesis that all of test at the 5 % significance level, a P-value the slope coefficients (excluding the of Significance F lower than 0.05 is taken as constant, or intercept) in a regression are evidence to reject the null hypothesis that all zero. For example, if one is performing a slope coefficients are equal to zero. Table no. 2 Analysis of the Influence of Exchange Rates on Romanian Exports during 1990-1998 SUMMARY OUTPUT Regression Statistics Multiple R 0.841257344 R Square 0.707713919 Adjusted R 0.665958765 Square Standard Error 1464.906896 Observations 9 ANOVA df SS MS F Significance F Regression 1 36372042.52 36372042.52 16.94913907 0.004476763 Residual 7 15021665.5 2145952.214 Total 8 51393708.02 Coefficients Standard Error t Stat P-value Lower 95 % Intercept 3924.234344 667.0897888 5.882617918 0.0006101 2346.817652 X Variable 1 5929.668494 1440.312045 4.116933212 0.004476763 2523.871702 Data source: Eurostat [5] Data table: author’s own processing 8 B U L E T I N Ş T I I N Ţ I F I C Nr. 1 (37) 2014 As shown in Table no. 2, both each coefficient is lower than 0.05); the null Significance F and P-value are lower than hypothesis that all slope coefficients are 0.05. It means that, for a 5% significance equal to zero is rejected, too (because the level, the null hypothesis of a zero coefficient Significance F is lower than 0.05). is rejected for each coefficient (because the P-value of Figure no.