Exchange rate misalignment and capital inflows: An endogenous threshold analysis for Malaysia

Noor Zahirah Mohd Sidek (), Mohammed Yusoff () and Qaiser Munir ()
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Noor Zahirah Mohd Sidek: Department of Economics, International Islamic University
Mohammed Yusoff: Department of Economics, International Islamic University, Malaysia

Economics Bulletin, 2009, vol. 29, issue 4, 2700-2711

Abstract: This study presents an attempt to investigate the impact of exchange rate misalignment on capital inflows in Malaysia. Specifically, a precise threshold value is estimated to examine when exchange rate misalignment suppresses capital inflows. To pursue these objectives, this study relies on the endogenous threshold analysis as of Hansen (1996, 2000). Results suggest that misalignment in terms of currency overvaluation, has a negative and significant effect when overvaluation is more than 15 percent. This estimate is consistent and robust despite the changes in the choice of explanatory variables.

Keywords: Exchange rate misalignment; Capital inflows competitiveness; Threshold effect (search for similar items in EconPapers)
JEL-codes: C3 F3 (search for similar items in EconPapers)
Date: 2009-10-28
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