Unravelling the nexus between energy prices and exchange rate in Malaysia: Fresh insights from a non-linear perspective using threshold cointegration analysis
This paper proposes a nonlinear threshold cointegration framework to study how energy prices affect Malaysia's nominal exchange rate, considering the money supply, income, and interest rate. The study employs a threshold cointegration approach utilizing threshold autoregressive and momentum thr...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Elsevier
2024-03-01
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| Series: | Heliyon |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S240584402402543X |
| _version_ | 1827316525931954176 |
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| author | Shamaila Butt Muhammad Ramzan Wing-Keung Wong Muhammad Ali Chohan Ayman Hassan Bazhair |
| author_facet | Shamaila Butt Muhammad Ramzan Wing-Keung Wong Muhammad Ali Chohan Ayman Hassan Bazhair |
| author_sort | Shamaila Butt |
| collection | DOAJ |
| description | This paper proposes a nonlinear threshold cointegration framework to study how energy prices affect Malaysia's nominal exchange rate, considering the money supply, income, and interest rate. The study employs a threshold cointegration approach utilizing threshold autoregressive and momentum threshold autoregressive models. The momentum threshold vector error correction model determines the short-run adjustment of exchange rate deviation from the long-run equilibrium level. The findings reveal that the nonlinear adjustment process to capture the short-run deviation in the long-run equilibrium path is primarily influenced by energy prices, money supply, and interest rates. These results highlight the importance of considering the impact of energy prices on exchange rate policies when formulating and implementing economic policies in Malaysia. The findings can also be valuable for decision-makers to comprehend the future dynamics of exchange rates and make well-informed decisions. |
| first_indexed | 2024-03-07T21:53:12Z |
| format | Article |
| id | doaj.art-578b6a4a7aea4a659449168861b486ca |
| institution | Directory Open Access Journal |
| issn | 2405-8440 |
| language | English |
| last_indexed | 2024-04-24T23:16:04Z |
| publishDate | 2024-03-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Heliyon |
| spelling | doaj.art-578b6a4a7aea4a659449168861b486ca2024-03-17T07:55:37ZengElsevierHeliyon2405-84402024-03-01105e26512Unravelling the nexus between energy prices and exchange rate in Malaysia: Fresh insights from a non-linear perspective using threshold cointegration analysisShamaila Butt0Muhammad Ramzan1Wing-Keung Wong2Muhammad Ali Chohan3Ayman Hassan Bazhair4Guangdong Chinese Academy of Sciences (CAS) Cogniser, Information Technology, Co., Ltd., Room 201, No. 221, Huanshi Avenue West, Nansha District, 511458, Guangzhou, Guangdong, ChinaFaculty of Management and Administrative Sciences, Department of Business Administration, University of Sialkot, Punjab, Pakistan; Adnan Kassar School of Business, Lebanese American University, Beirut, Lebanon; Corresponding author. Faculty of Management and Administrative Sciences, Department of Business Administration, University of Sialkot, Punjab, Pakistan.Department of Finance, Fintech & Blockchain Research Center, Big Data Research Center, Asia University, 500, Lioufeng Road, Wufeng, Taichung, 41354, Taiwan; Department of Medical Research, China Medical University Hospital, No.91, Hsueh-Shih Road, Taichung, 40402, Taiwan; Department of Economics and Finance, The Hang Seng University of Hong Kong, Hang Shin Link, Siu Lek Yuen, Shatin, Territories, 999077, Hong KongGuangdong Chinese Academy of Sciences (CAS) Cogniser, Information Technology, Co., Ltd., Room 201, No. 221, Huanshi Avenue West, Nansha District, 511458, Guangzhou, Guangdong, ChinaFaculty of Business Administration, Department of Economics and Finance, Taif University (TU), Altaif, Saudi ArabiaThis paper proposes a nonlinear threshold cointegration framework to study how energy prices affect Malaysia's nominal exchange rate, considering the money supply, income, and interest rate. The study employs a threshold cointegration approach utilizing threshold autoregressive and momentum threshold autoregressive models. The momentum threshold vector error correction model determines the short-run adjustment of exchange rate deviation from the long-run equilibrium level. The findings reveal that the nonlinear adjustment process to capture the short-run deviation in the long-run equilibrium path is primarily influenced by energy prices, money supply, and interest rates. These results highlight the importance of considering the impact of energy prices on exchange rate policies when formulating and implementing economic policies in Malaysia. The findings can also be valuable for decision-makers to comprehend the future dynamics of exchange rates and make well-informed decisions.http://www.sciencedirect.com/science/article/pii/S240584402402543XExchange rateEnergy priceThreshold cointegration approach |
| spellingShingle | Shamaila Butt Muhammad Ramzan Wing-Keung Wong Muhammad Ali Chohan Ayman Hassan Bazhair Unravelling the nexus between energy prices and exchange rate in Malaysia: Fresh insights from a non-linear perspective using threshold cointegration analysis Heliyon Exchange rate Energy price Threshold cointegration approach |
| title | Unravelling the nexus between energy prices and exchange rate in Malaysia: Fresh insights from a non-linear perspective using threshold cointegration analysis |
| title_full | Unravelling the nexus between energy prices and exchange rate in Malaysia: Fresh insights from a non-linear perspective using threshold cointegration analysis |
| title_fullStr | Unravelling the nexus between energy prices and exchange rate in Malaysia: Fresh insights from a non-linear perspective using threshold cointegration analysis |
| title_full_unstemmed | Unravelling the nexus between energy prices and exchange rate in Malaysia: Fresh insights from a non-linear perspective using threshold cointegration analysis |
| title_short | Unravelling the nexus between energy prices and exchange rate in Malaysia: Fresh insights from a non-linear perspective using threshold cointegration analysis |
| title_sort | unravelling the nexus between energy prices and exchange rate in malaysia fresh insights from a non linear perspective using threshold cointegration analysis |
| topic | Exchange rate Energy price Threshold cointegration approach |
| url | http://www.sciencedirect.com/science/article/pii/S240584402402543X |
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