On the predictive power of monetary exchange rate model: the case of the Malaysian Ringgit/US Dollar rate.
The predictive power of the monetary model for the Malaysian ringgit/US dollar (RM/USD) rate is analysed using quarterly data ending in 2006:Q3. We find compelling evidence of a long-run relationship between exchange rates and the economic fundamental determinant. Macroeconomic factors systematical...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English English |
| Published: |
Taylor & Francis
2009
|
| Online Access: | http://psasir.upm.edu.my/id/eprint/15926/ http://psasir.upm.edu.my/id/eprint/15926/1/On%20the%20predictive%20power%20of%20monetary%20exchange%20rate%20model.pdf |
| _version_ | 1848842816666468352 |
|---|---|
| author | Baharumshah, Ahmad Zubaidi Mohd, Siti Hamizah Sung, Ahn |
| author_facet | Baharumshah, Ahmad Zubaidi Mohd, Siti Hamizah Sung, Ahn |
| author_sort | Baharumshah, Ahmad Zubaidi |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | The predictive power of the monetary model for the Malaysian ringgit/US dollar (RM/USD) rate is analysed using quarterly data ending in 2006:Q3. We find compelling evidence of a long-run relationship between exchange
rates and the economic fundamental determinant. Macroeconomic factors systematically affect the long-run movement of the RM/USD rate. Additionally, the RM/USD rate was overvalued by about 10% severalquarters before the 1997 crisis; after the crisis, rates fluctuated close to the equilibrium value. The out-of-sample forecasts demonstrate that the monetary model outperforms the naı¨ve random walk model. The monetary and Purchasing Power Parity (PPP) models do well at the four to eight quarters horizon. |
| first_indexed | 2025-11-15T08:05:09Z |
| format | Article |
| id | upm-15926 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English English |
| last_indexed | 2025-11-15T08:05:09Z |
| publishDate | 2009 |
| publisher | Taylor & Francis |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-159262015-09-03T01:14:19Z http://psasir.upm.edu.my/id/eprint/15926/ On the predictive power of monetary exchange rate model: the case of the Malaysian Ringgit/US Dollar rate. Baharumshah, Ahmad Zubaidi Mohd, Siti Hamizah Sung, Ahn The predictive power of the monetary model for the Malaysian ringgit/US dollar (RM/USD) rate is analysed using quarterly data ending in 2006:Q3. We find compelling evidence of a long-run relationship between exchange rates and the economic fundamental determinant. Macroeconomic factors systematically affect the long-run movement of the RM/USD rate. Additionally, the RM/USD rate was overvalued by about 10% severalquarters before the 1997 crisis; after the crisis, rates fluctuated close to the equilibrium value. The out-of-sample forecasts demonstrate that the monetary model outperforms the naı¨ve random walk model. The monetary and Purchasing Power Parity (PPP) models do well at the four to eight quarters horizon. Taylor & Francis 2009 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/15926/1/On%20the%20predictive%20power%20of%20monetary%20exchange%20rate%20model.pdf Baharumshah, Ahmad Zubaidi and Mohd, Siti Hamizah and Sung, Ahn (2009) On the predictive power of monetary exchange rate model: the case of the Malaysian Ringgit/US Dollar rate. Applied Economics, 41 (14). pp. 1761-1770. ISSN 1466–4283 10.1080/00036840902817771 English |
| spellingShingle | Baharumshah, Ahmad Zubaidi Mohd, Siti Hamizah Sung, Ahn On the predictive power of monetary exchange rate model: the case of the Malaysian Ringgit/US Dollar rate. |
| title | On the predictive power of monetary exchange rate model:
the case of the Malaysian Ringgit/US Dollar rate. |
| title_full | On the predictive power of monetary exchange rate model:
the case of the Malaysian Ringgit/US Dollar rate. |
| title_fullStr | On the predictive power of monetary exchange rate model:
the case of the Malaysian Ringgit/US Dollar rate. |
| title_full_unstemmed | On the predictive power of monetary exchange rate model:
the case of the Malaysian Ringgit/US Dollar rate. |
| title_short | On the predictive power of monetary exchange rate model:
the case of the Malaysian Ringgit/US Dollar rate. |
| title_sort | on the predictive power of monetary exchange rate model:
the case of the malaysian ringgit/us dollar rate. |
| url | http://psasir.upm.edu.my/id/eprint/15926/ http://psasir.upm.edu.my/id/eprint/15926/ http://psasir.upm.edu.my/id/eprint/15926/1/On%20the%20predictive%20power%20of%20monetary%20exchange%20rate%20model.pdf |