Tests of the different variants of the monetary model in a developing economy: Malaysian experience in the pre- and post-crisis periods

Chin Lee (leechin@upm.edu.my), M Azali and Abul Masih
Authors registered in the RePEc Author Service: M. Azali

Applied Economics, 2009, vol. 41, issue 15, 1893-1902

Abstract: This study examines the validity of four different variants of the monetary model of exchange rate determination for Malaysia covering both the pre- and post-crisis periods using the vector error-correction models. The findings demonstrate that for both periods, the variables used are cointegrated. Tests tend to suggest that of the four variants of monetary model, the sticky-price model holds in both periods and the flexible-price model holds only in the post-crisis period. The proportionality between the exchange rate and relative money does not hold in any period. The plotted actual and fitted exchange rates for both sub-samples show that the models are able to track the actual exchange rate trend quiet well.

Date: 2009
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Working Paper: Tests of the Different Variants of the Monetary Model in a Developing Economy: Malaysian Experience in the Pre- and Post-crisis Periods (2009)
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DOI: 10.1080/00036840601131797

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