Is Monetary variable a determinant in the ringgit-dollar exchange rates model? A cointegration approach

Behrooz Gharleghi, Abu Hassan Shaari Md Nor

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

The main aim of this paper was to validate the relative price monetary model (RPMM) of exchange rate determination for the Malaysian exchange rate (RM/USD) using monthly data set from 1986-2010. The Johansen multivariate cointegration test and vector error correction model were employed. Because the time period under consideration includes the South East Asian financial crisis, the analysis is done using two time periods; the full time period as well as the period after the crisis. Two interesting results were observed from this empirical exercise. First, there is a long-run relationship between exchange rate and the selected macro variables only for the period after the crisis. Second, the forecasting performance of monetary approach based on the error correction model outperformed the Random Walk model.

Original languageEnglish
Pages (from-to)1163-1169
Number of pages7
JournalSains Malaysiana
Volume41
Issue number9
Publication statusPublished - Sep 2012

Fingerprint

Exchange rates
Cointegration
Exchange rate determination
Asian financial crisis
Long-run relationship
Vector error correction model
Exercise
Multivariate cointegration
Random walk model
Forecasting performance
Monetary approach
Relative prices
Cointegration test
Error correction model

Keywords

  • Cointegration
  • Error-correction model
  • Exchange rate
  • Relative price monetary model

ASJC Scopus subject areas

  • General

Cite this

Is Monetary variable a determinant in the ringgit-dollar exchange rates model? A cointegration approach. / Gharleghi, Behrooz; Md Nor, Abu Hassan Shaari.

In: Sains Malaysiana, Vol. 41, No. 9, 09.2012, p. 1163-1169.

Research output: Contribution to journalArticle

Gharleghi, Behrooz ; Md Nor, Abu Hassan Shaari. / Is Monetary variable a determinant in the ringgit-dollar exchange rates model? A cointegration approach. In: Sains Malaysiana. 2012 ; Vol. 41, No. 9. pp. 1163-1169.
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