Determinants of the real exchange rate in Malaysia

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

PhD Seminar (Econ)

Date & time

Friday 15 November 2019
9.30am–11.00am

Venue

Molonglo Theatre , Level 2, JG Crawford Building 132, Lennox Crossing, ANU

Speaker

Siti Kamariah Ghazali

Contacts

Dr Ryan Edwards

This paper examines the determinants of the real exchange rate (RER) in Malaysia during 1960 to 2017. Following a state-setting analytical amative of exchange rate regime shift and related macroeconomic policies, a RER equation specified drawing on the relevant theory is estimated using Autoregressive Distributed Lag Approach method. The results suggest that total factor productivity growth and net foreign assets are the key determinants of the RER in the long run, controlling for the impact of the Asian financial crisis and exchange rate regime shifts. The analysis suggests that Malaysia has experienced two distinct episodes of RER misalignment: persistent overvaluation from 1960 until 1970, undervaluation from 1985 until 2017, and periodic overvaluation and undervaluation during the rest of the years.

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