South Asian currencies

Speaking of the Asian crisis, let’s look at the currency that started it all, the Thai baht (THB). Prior to 1998, both the import and the export weights for the baht were trending higher. The cheaper baht did nothing to increase its import weights, and the loss of purchasing power in Thailand did surprisingly little to reduce export weights to Thailand. Overall, Thailand’s contribution to U.S. trade is and has been fairly minor.

The picture for Malaysia is similar to that of Thailand. Both import weights from Malaysia and export weights to it grew rapidly between 1986 and 1996 — and were unaffected by the ringgit’s (MYR) sharp drop. Neither the MYR nor the course of the Malaysian economy affected its trade weights with the U.S.

Indonesia also suffered in the Asian crisis. The 1997 collapse of the rupiah (IDR) preceded a decline — not the theorized increase — in import weights. The same cannot be said for export weights, however: Indonesia’s sudden impoverishment led to a swift decline in export weights, one that has yet to recover.
The last South Asian currency to be examined is the Philippine peso (PHP), which is yet another refutation of the protectionists. Its import weights fell sharply after the PHP fell in 1997, but export weights to the suddenly poorer country actually trended higher between 1998 and 2003 before falling sharply in 2004.