Real Exchange Rate and Foreign Trade Relationship: The Case of Hungary
| Author | Ardit Boka |
| Position | Ankara HBV University', Ankara, Turkey |
| Pages | 26-31 |
Vo
l.
6
N
o
.
3
N
ovem
b
er
,
2020
A
cademic Journal o
f
Business,
A
dministration, Law and Social Science
s
II
PCCL Publishin
g
, Graz-
A
ustri
a
I
SSN 2410-391
8
A
cces online at www.ii
p
ccl.or
g
2
6
Real Exchange Rate and Foreign Trade Relationship: The Case of Hungar
y
MSc.
A
r
di
t B
oka
"Ankara HBV Universit
y
", Ankara, Turke
y
Abs
tr
ac
t
H
ungary’s foreign trade has scored progress in recent years. The result of this progress has
b
rought a positive eff ect on the country’s trade defi cit. This situation also raised the question
of whether foreign trade is aff ected by exchange rates. The purpose of this study is to evaluate
the factors aff ecting the real exchange rate in Hungary from 1995 to 2020.
I
n this study, the
G
ranger causality analysis is used to measure the eff ects of macroeconomic factors on the real
e
xchange rate. This study considers macroeconomic factors like exports and imports. Data o
f
the study have been collected from the World Bank. The results show that there is a signifi cant
a
nd positive eff ect of exports on real exchange rate.
A
lso, there is a bidirectional causality
relationship from exports to imports
.
K
e
y
words
:
real exchange rate, exports and imports.
I
ntr
oduc
t
io
n
H
ungar
y
’s
f
oreign trade volume has made im
p
ortant
p
rogress in recent
y
ears and has
i
ncreased ra
p
idl
y
.
A
lso, the Hungarian Forint has become relativel
y
valuable in recent
y
ears. So how much real exchange rate is a
ff
ected b
y
f
oreign trade, it is becoming an
i
m
p
ortant issue. The estimation o
f
the domestic currenc
y
coincides with the increase
i
n the level o
f
im
p
orts. Meanwhile, the devaluation o
f
the domestic currenc
y
leads
t
o an increase in the level o
f
ex
p
orts, a
f
actor that
p
ositivel
y
a
ff
ects the trade de
fi
cit.
T
he goal o
f
each countr
y
is
f
or the number o
f
ex
p
orts to be higher than the number o
f
i
m
p
orts. Governments o
en undertake re
f
orms that a
ff
ect the value o
f
the domestic
currenc
y
, thus maintaining trade de
fi
cit balances.
A
er 1990 the state sector o
f
the econom
y
began to be
p
rivatized when its greatest
d
evelo
p
ment was a
er the Second World War. The agricultural and industrial sectors
a
re
q
uite develo
p
ed, mainl
y
the industrial sector, which has ex
p
anded since 1945
(
I
nternational Monetar
y
Fond, 2019). Hungar
y
has an ex
p
ort-oriented trading
e
conom
y
, making it the 35th largest ex
p
orter in the world. S
p
eci
fi
call
y
, in 2015, the
H
ungarian econom
y
had over 100 billion
U
SD ex
p
orts, where 79% o
f
the level o
f
e
x
p
orts went to
EU
countries an
d
t
h
e rest ton on-
EU
countries (Hungarian Centra
l
S
tatistical
Offi
ce, 2016
)
.
I
n t
h
is stu
dy
rea
l
exc
h
ange rate, w
h
ic
h
is an im
p
ortant issue wi
ll
b
e examine
d
wit
h
m
acroeconomic variables. There
f
ore, indicators like real exchange rate, ex
p
orts and
i
m
p
orts data are used
f
or this anal
y
sis based on the timeline o
f
the
y
ears 1995-2020. The
stud
y
tends to consider two macroeconomic
f
actors that a
ff
ect real exchange rate. The
p
lan o
f
stud
y
is divided into sections.
I
t begins with an introduction as the
fi
rst
p
art.
F
urthermore, the stud
y
continues with the second section, which gives in
f
ormation
o
n literature. The third section
f
ocuses on methodolog
y
and data anal
y
sis. Finall
y
, the
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