Tests of different monetary aggregates for the monetary models of the exchange rate in five ASEAN countries

Lee, Chin; Habibullah, Muzafar Shah; Azali, M.

doi:10.1080/00036840902845517

Cited by 7 publications

(7 citation statements)

References 53 publications

(42 reference statements)

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“…Therefore, Model 2 can be used to explain the exchange rate movement in the Philippines. The superior performance of Divisia money is consistent with the findings of Lee et al (2009). The monetary model of exchange rate is expressed as:…”

Section: Empirical Findingssupporting

confidence: 79%

“…When the Divisia measurement of mo ney was used for the estimations of demand for money, stable demand for mo ney functions was derived by Puah and Hiew (2010), Leong et al (2010) and Sianturi et al (2017). The supe riority of Divisia monetary aggregates was also discovered by Lee et al (2009) when performing a longrun analysis for Malaysia and the Phi lippines using the monetary model of exchange rate. The causality directed from the Divisia measurement of money to the exchange rate was proved to be strong by Ghosh and Bhadury (2017).…”

Section: Introductionmentioning

confidence: 99%

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Divisia monetary model of exchange rate determination: the case of Philippines

Leong¹,

Puah²,

Ismail³

2018

EA-XXI

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In literature, inferior performance still prevails as one of the unresolved issues with regard to the monetary model of exchange rate. A money demand function that is unstable can contribute to the inferior performance of the model. One of the causes for an unstable money demand function is the application of the simple sum monetary aggregate in the estimation. Therefore, an alternative measurement of money, the Divisia monetary aggregate, is applied in the estimation of the monetary model of exchange rate. The results show that cointegration exists between monetary fundamentals and the exchange rate in the Divisia model. Consequently, to estimate the exchange rate for the Philippines, the Divisia monetary aggregate can be used as an alternative money supply.

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Section: Empirical Findingssupporting

confidence: 79%

Section: Introductionmentioning

confidence: 99%

Divisia monetary model of exchange rate determination: the case of Philippines

Leong¹,

Puah²,

Ismail³

2018

EA-XXI

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“…In this study the general model on exchange rates adopted was as proposed by Chin and Azali (2012), Eun et al (2011), Chin et al (2009. The model is an estimation of macroeconomic fundamental variables based on econometrics that shows the equilibrium of exchange rates in both long-term and short-term.…”

Section: Methodology Model (Theoretical Framework)mentioning

confidence: 99%

The Macroeconomic Fundamentals of the Real Exchange Rate in Malaysia: Some Empirical Evidence

2021

JEM

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The aim of this paper is to estimate the equilibrium of exchange rates and identify the roles of macroeconomics fundamentals affecting exchange rates using Malaysian data spanning 1970 to 2019. This study adopts the Autoregressive Distributed Lag model to examine the long-run relationships or cointegration among variables and the dynamic effect within variables in the short-run over the sample period. The results suggest that inflation rate and national income growth rate play important roles in influencing exchange rate movement. The results also reveal that the misalignment of exchange rates is quite small and stable during 1988 to 2019, except for 2015 which was attributed to the weaker growth in China. Consecutively, this study suggests that the parity condition is only important in the long-run in explaining exchange rates behaviour for the sample country.

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“…The issues of international trade and the misalignment of exchange rates are often debated over the past few decades (Lee, 2005;Coudert & Couharde, 2007;You & Sarantis, 2008;Koske, 2008;Chin et al, 2009;Naseem et al, 2008;Tsen Wong, 2013). Malaysian currency is also believed to experience a misalignment of exchange rates, due the fact that this country is newly industrialized and implemented its open economy policy since its independence in 1957.…”

Section: Introductionmentioning

confidence: 99%

“…Previous studies such as Lee (2005), Chin et al (2009), Chin (2005) and Chin et al (2007) employ methodology proposed by Meese and Rogoff (1981) to determine the predictive power of exchange rate model namely Monetary model for ASEAN-5, including Malaysia. Whilst, another study conducted by Tsen Wong (2013) employed the similar methodology to determine the best models to estimate equilibrium real exchange rate in Malaysia.…”

Section: Introductionmentioning

confidence: 99%

An Empirical Evidence of Misalignment Exchange Rate in Malaysia Using Beer Model

Shukri¹,

Habibullah²

2018

TOJDAC

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As a small, open economy and newly industrialised country, Malaysia is also experiencing misalignment in its currency exchange. Hence, the aims of this paper is to investigate the exchange rate movement using BEER model. This paper adopts the bound testing and autoregressive distributed lag (ARDL) to examine the cointegration among variables for the period of 1970 to 2012. The results suggest that productivity differential, net foreign assets, terms of trade and trade liberalization play important roles in influencing exchange rate movement in Malaysia. The results also show that a misalignment of exchange rate is at a small percentage and stable. Besides that, the predictive power of BEER model shows a small root mean square error, thus revealing that the model is likely fit the data very close throughout the period and tracks the actual exchange rate to get a considerable number of turning points correct.

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Tests of different monetary aggregates for the monetary models of the exchange rate in five ASEAN countries

Cited by 7 publications

References 53 publications

Divisia monetary model of exchange rate determination: the case of Philippines

Divisia monetary model of exchange rate determination: the case of Philippines

The Macroeconomic Fundamentals of the Real Exchange Rate in Malaysia: Some Empirical Evidence

An Empirical Evidence of Misalignment Exchange Rate in Malaysia Using Beer Model

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