An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment
Following the reinstatement to managed floating exchange rate regime in July 2005, the real effective exchange rate (REER) of Malaysian ringgit (RM) has been fluctuating, albeit, slightly, which raises the question whether the current trend is consistent with the economic fundamentals. This paper...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
World Business Institute, Australia
2009
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/549/1/An_empirical_analysis_of_Malaysian_ringgit_equilibrium_exchange_rate_and_misalignment.pdf |
| _version_ | 1796874677365243904 |
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| author | Mohd Sidek, Noor Zahirah Yusoff, Mohammed |
| author_facet | Mohd Sidek, Noor Zahirah Yusoff, Mohammed |
| author_sort | Mohd Sidek, Noor Zahirah |
| collection | IIUM |
| description | Following the reinstatement to managed floating exchange
rate regime in July 2005, the real effective exchange rate
(REER) of Malaysian ringgit (RM) has been fluctuating,
albeit, slightly, which raises the question whether the current trend is consistent with the economic fundamentals. This paper attempts to ascertain the degree of misalignment of the ringgit by estimating the long run equilibrium real
effective exchange rate of the currency. Based on Johansen
vector cointegration technique, we have identified productivity, government consumption expenditure, and
trade openness as important determinants of the ringgit long
run equilibrium value. Results suggest that the ringgit was
persistently overvalued prior to the 1997 crisis. After the
crisis, the ringgit fluctuates around its long run equilibrium and the misalignments are eliminated over a relatively short period. |
| first_indexed | 2024-03-05T22:27:51Z |
| format | Article |
| id | oai:generic.eprints.org:549 |
| institution | International Islamic University Malaysia |
| language | English |
| last_indexed | 2024-03-05T22:27:51Z |
| publishDate | 2009 |
| publisher | World Business Institute, Australia |
| record_format | dspace |
| spelling | oai:generic.eprints.org:5492012-01-16T07:43:31Z http://irep.iium.edu.my/549/ An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment Mohd Sidek, Noor Zahirah Yusoff, Mohammed HG201 Money HG3810 Foreign exchange Following the reinstatement to managed floating exchange rate regime in July 2005, the real effective exchange rate (REER) of Malaysian ringgit (RM) has been fluctuating, albeit, slightly, which raises the question whether the current trend is consistent with the economic fundamentals. This paper attempts to ascertain the degree of misalignment of the ringgit by estimating the long run equilibrium real effective exchange rate of the currency. Based on Johansen vector cointegration technique, we have identified productivity, government consumption expenditure, and trade openness as important determinants of the ringgit long run equilibrium value. Results suggest that the ringgit was persistently overvalued prior to the 1997 crisis. After the crisis, the ringgit fluctuates around its long run equilibrium and the misalignments are eliminated over a relatively short period. World Business Institute, Australia 2009-09 Article PeerReviewed application/pdf en http://irep.iium.edu.my/549/1/An_empirical_analysis_of_Malaysian_ringgit_equilibrium_exchange_rate_and_misalignment.pdf Mohd Sidek, Noor Zahirah and Yusoff, Mohammed (2009) An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment. Global Economy and Finance Journal, 2 (2). pp. 104-126. http://wbiaus.org/GEFJ.html |
| spellingShingle | HG201 Money HG3810 Foreign exchange Mohd Sidek, Noor Zahirah Yusoff, Mohammed An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment |
| title | An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment |
| title_full | An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment |
| title_fullStr | An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment |
| title_full_unstemmed | An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment |
| title_short | An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment |
| title_sort | empirical analysis of malaysian ringgit equilibrium exchange rate and misalignment |
| topic | HG201 Money HG3810 Foreign exchange |
| url | http://irep.iium.edu.my/549/1/An_empirical_analysis_of_Malaysian_ringgit_equilibrium_exchange_rate_and_misalignment.pdf |
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