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Exchange rate misalignment and capital inflows: An endogenous threshold analysis for Malaysia

Author

Listed:
  • Noor Zahirah Mohd Sidek

    (Department of Economics, International Islamic University)

  • Mohammed Yusoff

    (Department of Economics, International Islamic University, Malaysia)

  • Qaiser Munir

    (School of Business and Economics, Universiti Malaysia Sabah)

Abstract

This study presents an attempt to investigate the impact of exchange rate misalignment on capital inflows in Malaysia. Specifically, a precise threshold value is estimated to examine when exchange rate misalignment suppresses capital inflows. To pursue these objectives, this study relies on the endogenous threshold analysis as of Hansen (1996, 2000). Results suggest that misalignment in terms of currency overvaluation, has a negative and significant effect when overvaluation is more than 15 percent. This estimate is consistent and robust despite the changes in the choice of explanatory variables.

Suggested Citation

  • Noor Zahirah Mohd Sidek & Mohammed Yusoff & Qaiser Munir, 2009. "Exchange rate misalignment and capital inflows: An endogenous threshold analysis for Malaysia," Economics Bulletin, AccessEcon, vol. 29(4), pages 2700-2711.
    • Handle: RePEc:ebl:ecbull:eb-09-00417
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange rate misalignment; Capital inflows competitiveness; Threshold effect;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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