Malaysia has been a major wood producer and exporter since 1970s. The
Malaysian wood industry has grown from being a producer and exporter of
logs to primary and higher value-added products such as sawntimber, plywood,
veneer, and mouldings. The export contribution of wood also plays a significant
development for the Malaysian export sector. For Malaysian wood export,
being one of the sector that influenced by the exchange rate volatility, the study
on the impact of exchange rate on export is considered important. This study
uses Granger causality approach to analyze the relationship between exchange
rate and wood export. Chow test is used to examine the structural change of
exchange rate regime; pegged exchange rate regime and managed float
exchange rate. The quarterly data of exchange rate and wood export from
1997-2008 were employed for this study. The result indicated that there is a
structural break in the third quarter of 2005 to the fourth quarter of 2008 which
real exchange rate is significant and positively correlated to timber export
under managed floating exchange rate regime. Thus, understanding the
relationship between exchange rate and timber export performance is
important for Malaysia to further develop the direction of the industry.
