The USD strength and economic growth: an empirical study in Asia Pacific countries

Abstract

The USD strength has strong impacts on trade activities, investment flows, and also consumption in opened countries through income effects and substitution effects, which are now stronger due to the higher integrations around the world. Asia Pacific is one of the major economic areasin terms of population, economic scale, and their openness, which are also impacted by the USD strength. This paper investigates the impacts of USD strength on real economic growth of 39 Asia Pacific countries (excluding China) using the panel data from 2000 to 2013. By recruiting the fixed effects and random effects models for panel data estimators, it is found that the income effects are strong and stronger in developing countries, but the 2008 global financial crisis has reduced them. Furthermore, the Chinese economy is confirmed to have an important role in real economic growth of both developed and developing Asia Pacific countries.