Economics at your fingertips  

Evaluating the exchange rate and commodity price nexus in Malaysia: evidence from the threshold cointegration approach

Shamaila Butt (), Suresh Ramakrishnan (), Nanthakumar Loganathan () and Muhammad Ali Chohan ()
Additional contact information
Shamaila Butt: Universiti Teknologi Malaysia
Suresh Ramakrishnan: Universiti Teknologi Malaysia
Muhammad Ali Chohan: Universiti Teknologi Malaysia

Financial Innovation, 2020, vol. 6, issue 1, 1-19

Abstract: Abstract This paper examines the long- and short-run dynamics of asymmetric adjustment between the nominal exchange rate and commodity prices, namely oil, palm oil, rubber, and natural gas prices, in Malaysia using monthly data from January 1994 to December 2017. The relationship between exchange rate and each commodity price is examined in terms of Engle-Granger and threshold cointegrations. The estimated results provide evidence of long-run threshold cointegration and show that the adjustments towards the long-run equilibrium position are asymmetric in the short run. Furthermore, this study finds evidence of a unidirectional causal relationship running from the nominal exchange rate to oil price in the long and short run using a spectral frequency domain causality application. There is also empirical evidence of bidirectional causality between the nominal exchange rate and palm oil price, rubber price, and natural gas price in the long and short run. Overall, the findings have significant implications for the current debate on the future of primary commodities in Malaysia.

Keywords: Commodity prices; Exchange rate; Threshold cointegration (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link) Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... nomics/journal/40589

DOI: 10.1186/s40854-020-00181-6

Access Statistics for this article

Financial Innovation is currently edited by J. Leon Zhao and Zongyi

More articles in Financial Innovation from Springer, Southwestern University of Finance and Economics
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2021-10-04
Handle: RePEc:spr:fininn:v:6:y:2020:i:1:d:10.1186_s40854-020-00181-6