THE REAL EXCHANGE RATE DETERMINATION: EMPIRICAL EVIDENCE FROM MALAYSIA

Wong Hock Tsen ()
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Wong Hock Tsen: Universiti Malaysia Sabah, Jalan UMS, 88400 Kota Kinabalu, Sabah, Malaysia

The Singapore Economic Review (SER), 2014, vol. 59, issue 02, 1-19

Abstract: This study examines the real exchange rate determination in Malaysia. The result of the autoregressive distributed lag approach shows that an increase in the real interest rate differential, productivity differential, the real oil price or reserve differential will lead to an appreciation of the real exchange rate in the long run. The real oil price and reserve differential are important in the real exchange rate determination. The dynamic ordinary least squares (DOLS) estimator shows about the same conclusion of the autoregressive distributed lag approach. The result of the generalized forecast error variance decomposition shows that the real interest rate differential, productivity differential, the real oil price and reserve differential are generally important to the real exchange rate determination.

Keywords: Real exchange rate; real oil price; reserve differential; cointegration; variance decomposition; F31; F37; F10 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0217590814500167

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