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The Real Exchange Rate Determination: Empirical Evidence From Malaysia

Author

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  • WONG HOCK TSEN

    (Universiti Malaysia Sabah, Jalan UMS, 88400 Kota Kinabalu, Sabah, Malaysia)

Abstract

This study examines the real exchange rate determination in Malaysia. The result of the autoregressive distributed lag approach shows that an increase in the real interest rate differential, productivity differential, the real oil price or reserve differential will lead to an appreciation of the real exchange rate in the long run. The real oil price and reserve differential are important in the real exchange rate determination. The dynamic ordinary least squares (DOLS) estimator shows about the same conclusion of the autoregressive distributed lag approach. The result of the generalized forecast error variance decomposition shows that the real interest rate differential, productivity differential, the real oil price and reserve differential are generally important to the real exchange rate determination.

Suggested Citation

  • Wong Hock Tsen, 2014. "The Real Exchange Rate Determination: Empirical Evidence From Malaysia," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 59(02), pages 1-19.
    • Handle: RePEc:wsi:serxxx:v:59:y:2014:i:02:n:s0217590814500167
    DOI: 10.1142/S0217590814500167
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    Cited by:

    1. Sushil Kumar Rai & Akhilesh Kumar Sharma, 2023. "Forecasting Exchange Rate Volatility In India Under Univariate And Multivariate Analysis," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(1), pages 175-190, March.

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    More about this item

    Keywords

    Real exchange rate; real oil price; reserve differential; cointegration; variance decomposition; F31; F37; F10;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F10 - International Economics - - Trade - - - General

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