The Impact of Interest Rate on Exchange Rate Within ASEAN Countries: Evidence from Linear and Nonlinear ARDL Frameworks

Ahmed, Heba; Mazlan, Nur Syazwani

doi:10.1177/0974910120974798

Cited by 6 publications

(4 citation statements)

References 44 publications

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“…The situation will spark arbitrage activities as a result of profit arising from the disequilibrium price between countries. Ahmed and Mazlan (2021) update the finding of ASEAN countries by revealing that the effect of interest rate on the external purchasing power indicator varies with the existence of short run and long run asymmetries within ASEAN members. According to Phuc and Duc (2019), although inflation volatility, trade openness, and interest rate significantly influence changes of external purchasing power indicators in Australia, Japan, New Zealand and South Korea, the impact varies across the studied sample.…”

Section: Literature Reviewmentioning

confidence: 82%

The Effects of Interest Rate on Real Effective Exchange Rate Volatility Spillover in Malaysia and Thailand: Empirical Evidence

et al. 2021

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The research examined this asymmetric effect between the interrelationship of the interbank rate on the external competitiveness purchasing power represented by the real effective exchange rate for Malaysia and Thailand using monthly data covering the period of 1994 until 2020. The empirical findings confirms an asymmetric effect between interbank rate and real effective exchange rate based on the nonlinear autoregressive distributed lag estimates. The research also finds a unidirectional asymmetric causal relationship running from real effective exchange rate on interbank rate Thailand, which indicate the monetary policy has a direct relationship on interbank rate volatility. While in Malaysia, there is no causality running between both variables since the country has proposed several soft monetary policies and more concentrating on the short-term borrowing by improving the tight money supply circulation based on the domestic inflation, global economic, and financial market volatility. Therefore, the research recommends a specific need of monetary stabilizer policy to stabilize both countries’ currencies and put more effort to liberalize the foreign exchange rate system in a globalized economy.

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Section: Literature Reviewmentioning

confidence: 82%

The Effects of Interest Rate on Real Effective Exchange Rate Volatility Spillover in Malaysia and Thailand: Empirical Evidence

et al. 2021

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“…When interest rates appreciate, it increases the goods and services prices, decreases the local currency, and enhances the exchange rate volatility. Ahmed and Mazlan (2021) found that there is a short-run relationship between exchange rate and interest rate in ASEAN countries, and interest rate changes negatively affect the exchange rate. Tafa (2015) conducted a study on interest rate's association with the exchange rate.…”

Section: The Exchange Rate Impact On Interest Ratementioning

confidence: 99%

Determinants of Exchange Rate: Vector Error Correction Method (VECM). Case of Yemen

Al-Masbhi¹,

Du²

2021

JSS

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This paper examines the potential determinants of the exchange rate in Yemen. Different econometric tests were applied to examine the impact of the exchange rate on the inflation rate, the current account balance, GDP growth, and interest rate from 1998 to 2020. Findings show variables are stationary at first difference I(1). Johansen's cointegration test approved the existence of the long-term relationship. According to the VECM test, the variables share a long-run relationship. There is also a short-run association of the exchange rate with inflation and interest rate. The Granger causality test implies that the exchange rate granger causes interest rate and inflation rate. Furthermore, diagnostic tests were performed to check the results' reliability, which shows the findings are consistent. Moreover, the study also suggests that these findings contribute to policymakers and government officials' understanding of the exchange rate fluctuation. It will also show the significant impact of the exchange rate on these variables in Yemen and other developing countries with a similar economic system. The research also provides suggestions to promote development sustainability in Yemen.

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“…The strength of the country's currency is determined by how much it is exchanged. Therefore, it becomes pertinent to any economy desirous in achieving sustainable economic growth and development (Ahmed & Zarma, 1997). Exchange rate appreciation or depreciation mainly occur due to changes in demand and supply of currencies between countries, level of economic growth, prevailing trade balances, magnitude of country's foreign reserve, inflation levels, public debt profile, unemployment.…”

Section: Introductionmentioning

confidence: 99%

Exchange Rate And National Output Performances: The Implication On Nigeria’s Economy

Bernard Eze,

Augustina Nnenna,

Martin Ifeanyi

2024

Glo J. Soc. Sci.

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The study investigated the effect of exchange rate on economic growth in Nigeria using annual time series data from 1970 to 2021. The data were obtained from Statistical Bulletin published by the Central Bank of Nigeria 2021. The empirical studies reviewed had divergent views on the impact of exchange rate on economic growth in Nigeria. The study began with the test of unit root using Augmented Dickey-Fuller (ADF) and Philip-Peron (PP) unit root tests, followed by Johansen cointegration test, vector error correction model (VECM). The VECM indicated that exchange rate appreciation contracts output. The granger causality tests revealed that exchange rate and economic growth reinforce one another. However, based on these findings, it becomes imperative to build adequate foreign reserve to cushion-off trade shocks, promote import substitute industries, diversification of economy and enhance export oriented industries and reduction in cost of borrowing to enable domestic firms to benefit from the theoretical advantages of exchange rate variation. These measures promote the performances of macroeconomic variables in Nigeria.

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The Impact of Interest Rate on Exchange Rate Within ASEAN Countries: Evidence from Linear and Nonlinear ARDL Frameworks

Cited by 6 publications

References 44 publications

The Effects of Interest Rate on Real Effective Exchange Rate Volatility Spillover in Malaysia and Thailand: Empirical Evidence

The Effects of Interest Rate on Real Effective Exchange Rate Volatility Spillover in Malaysia and Thailand: Empirical Evidence

Determinants of Exchange Rate: Vector Error Correction Method (VECM). Case of Yemen

Exchange Rate And National Output Performances: The Implication On Nigeria’s Economy

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