The impact of exchange rate on Malaysia wood export

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.