An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment

Following the reinstatement to managed floating exchange rate regime in July 2005, the real effective exchange rate (REER) of Malaysian ringgit (RM) has been fluctuating, albeit, slightly, which raises the question whether the current trend is consistent with the economic fundamentals. This paper...

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Main Authors:	Mohd Sidek, Noor Zahirah, Yusoff, Mohammed
Format:	Article
Language:	English
Published:	World Business Institute, Australia 2009
Subjects:	HG201 Money HG3810 Foreign exchange
Online Access:	http://irep.iium.edu.my/549/ http://irep.iium.edu.my/549/ http://irep.iium.edu.my/549/1/An_empirical_analysis_of_Malaysian_ringgit_equilibrium_exchange_rate_and_misalignment.pdf

id	iium-549
recordtype	eprints
spelling	iium-5492012-01-16T07:43:31Z http://irep.iium.edu.my/549/ An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment Mohd Sidek, Noor Zahirah Yusoff, Mohammed HG201 Money HG3810 Foreign exchange Following the reinstatement to managed floating exchange rate regime in July 2005, the real effective exchange rate (REER) of Malaysian ringgit (RM) has been fluctuating, albeit, slightly, which raises the question whether the current trend is consistent with the economic fundamentals. This paper attempts to ascertain the degree of misalignment of the ringgit by estimating the long run equilibrium real effective exchange rate of the currency. Based on Johansen vector cointegration technique, we have identified productivity, government consumption expenditure, and trade openness as important determinants of the ringgit long run equilibrium value. Results suggest that the ringgit was persistently overvalued prior to the 1997 crisis. After the crisis, the ringgit fluctuates around its long run equilibrium and the misalignments are eliminated over a relatively short period. World Business Institute, Australia 2009-09 Article PeerReviewed application/pdf en http://irep.iium.edu.my/549/1/An_empirical_analysis_of_Malaysian_ringgit_equilibrium_exchange_rate_and_misalignment.pdf Mohd Sidek, Noor Zahirah and Yusoff, Mohammed (2009) An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment. Global Economy and Finance Journal, 2 (2). pp. 104-126. http://wbiaus.org/GEFJ.html
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG201 Money HG3810 Foreign exchange
spellingShingle	HG201 Money HG3810 Foreign exchange Mohd Sidek, Noor Zahirah Yusoff, Mohammed An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment
description	Following the reinstatement to managed floating exchange rate regime in July 2005, the real effective exchange rate (REER) of Malaysian ringgit (RM) has been fluctuating, albeit, slightly, which raises the question whether the current trend is consistent with the economic fundamentals. This paper attempts to ascertain the degree of misalignment of the ringgit by estimating the long run equilibrium real effective exchange rate of the currency. Based on Johansen vector cointegration technique, we have identified productivity, government consumption expenditure, and trade openness as important determinants of the ringgit long run equilibrium value. Results suggest that the ringgit was persistently overvalued prior to the 1997 crisis. After the crisis, the ringgit fluctuates around its long run equilibrium and the misalignments are eliminated over a relatively short period.
format	Article
author	Mohd Sidek, Noor Zahirah Yusoff, Mohammed
author_facet	Mohd Sidek, Noor Zahirah Yusoff, Mohammed
author_sort	Mohd Sidek, Noor Zahirah
title	An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment
title_short	An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment
title_full	An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment
title_fullStr	An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment
title_full_unstemmed	An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment
title_sort	empirical analysis of malaysian ringgit equilibrium exchange rate and misalignment
publisher	World Business Institute, Australia
publishDate	2009
url	http://irep.iium.edu.my/549/ http://irep.iium.edu.my/549/ http://irep.iium.edu.my/549/1/An_empirical_analysis_of_Malaysian_ringgit_equilibrium_exchange_rate_and_misalignment.pdf
first_indexed	2023-09-18T20:07:40Z
last_indexed	2023-09-18T20:07:40Z
_version_	1777407267237265408

An empirical analysis of Malaysian ringgit equilibrium exchange rate and misalignment

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