Exchange rates in Singapore and Malaysia: are they driven by the same fundamentals?
This study examines the empirical link between exchange rates and fundamentals using the monetary model of the exchange rate for the Malaysian ringgit and the Singapore dollar against two key bilateral rates-the US dollar and the Japanese yen. We formally tested for the long-run monetary model of ex...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Faculty of Economics & Administration, University of Malaya and Malaysian Economic Association
2010
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| Online Access: | http://psasir.upm.edu.my/id/eprint/14631/ http://psasir.upm.edu.my/id/eprint/14631/1/Exchange%20rates%20in%20Singapore%20and%20Malaysia%20are%20they%20driven%20by%20the%20same%20fundamentals.pdf |
| _version_ | 1848842447707176960 |
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| author | Baharumshah, Ahmad Zubaidi MacDonald, Ronald Mohd, Siti Hamizah |
| author_facet | Baharumshah, Ahmad Zubaidi MacDonald, Ronald Mohd, Siti Hamizah |
| author_sort | Baharumshah, Ahmad Zubaidi |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This study examines the empirical link between exchange rates and fundamentals using the monetary model of the exchange rate for the Malaysian ringgit and the Singapore dollar against two key bilateral rates-the US dollar and the Japanese yen. We formally tested for the long-run monetary model of exchange rate determination and found several interesting results. First, a unique cointegrating relationship was identified, based on theory and data, which means that monetary variables and the exchange rate are connected. Second, we found that it is the exchange rate that adjusts to the long-run equilibrium after a shock and not the other way round. Finally, it is shown that the fundamentals-based model produced out-of-sample forecasts that can outperform a random walk model both in the medium and long terms. |
| first_indexed | 2025-11-15T07:59:17Z |
| format | Article |
| id | upm-14631 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T07:59:17Z |
| publishDate | 2010 |
| publisher | Faculty of Economics & Administration, University of Malaya and Malaysian Economic Association |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-146312019-04-09T03:37:29Z http://psasir.upm.edu.my/id/eprint/14631/ Exchange rates in Singapore and Malaysia: are they driven by the same fundamentals? Baharumshah, Ahmad Zubaidi MacDonald, Ronald Mohd, Siti Hamizah This study examines the empirical link between exchange rates and fundamentals using the monetary model of the exchange rate for the Malaysian ringgit and the Singapore dollar against two key bilateral rates-the US dollar and the Japanese yen. We formally tested for the long-run monetary model of exchange rate determination and found several interesting results. First, a unique cointegrating relationship was identified, based on theory and data, which means that monetary variables and the exchange rate are connected. Second, we found that it is the exchange rate that adjusts to the long-run equilibrium after a shock and not the other way round. Finally, it is shown that the fundamentals-based model produced out-of-sample forecasts that can outperform a random walk model both in the medium and long terms. Faculty of Economics & Administration, University of Malaya and Malaysian Economic Association 2010 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/14631/1/Exchange%20rates%20in%20Singapore%20and%20Malaysia%20are%20they%20driven%20by%20the%20same%20fundamentals.pdf Baharumshah, Ahmad Zubaidi and MacDonald, Ronald and Mohd, Siti Hamizah (2010) Exchange rates in Singapore and Malaysia: are they driven by the same fundamentals? Malaysian Journal of Economic Studies, 47 (2). pp. 123-141. ISSN 1511-4554 https://mjes.um.edu.my/index.php/MJES/article/view/2837 |
| spellingShingle | Baharumshah, Ahmad Zubaidi MacDonald, Ronald Mohd, Siti Hamizah Exchange rates in Singapore and Malaysia: are they driven by the same fundamentals? |
| title | Exchange rates in Singapore and Malaysia: are they driven by the same fundamentals? |
| title_full | Exchange rates in Singapore and Malaysia: are they driven by the same fundamentals? |
| title_fullStr | Exchange rates in Singapore and Malaysia: are they driven by the same fundamentals? |
| title_full_unstemmed | Exchange rates in Singapore and Malaysia: are they driven by the same fundamentals? |
| title_short | Exchange rates in Singapore and Malaysia: are they driven by the same fundamentals? |
| title_sort | exchange rates in singapore and malaysia: are they driven by the same fundamentals? |
| url | http://psasir.upm.edu.my/id/eprint/14631/ http://psasir.upm.edu.my/id/eprint/14631/ http://psasir.upm.edu.my/id/eprint/14631/1/Exchange%20rates%20in%20Singapore%20and%20Malaysia%20are%20they%20driven%20by%20the%20same%20fundamentals.pdf |