Monetary Model of Exchange Rate for Thailand: Long-run Relationship and Monetary Restrictions
AbstractThis paper examines the long-run relationship between exchange rate and its determinants based on the flexible-price monetary model. Multivariate cointegration approach (Johansan 1988, 1989 and Johansen-Juselius 1990) is adopted to attain our objective of study. The empirical results provide evidence favoring the monetary approach to exchange rate for a small and open emerging economy, namely Thailand. In addition, the validity of the underlying assumptions of the monetary approach to the determination of exchange rate is established. The above findings suggest that exchange rate players may effectively monitor and forecast the exchange rate movement via the money supplies, incomes, and interest rates variables of both Thailand and Japan. Besides, one has to follow the economic development of Thailand’s major trading partner, Japan, to understanding the movement of exchange rate for Thailand. Moreover, our findings add new insights to accompaniment previous studies that documented the important influence of US in the emerging Asian economies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 17715.
Date of creation: 2009
Date of revision:
Exchange rate; monetary model; Thailand; cointegration;
Other versions of this item:
- Venus Khim-Sen Liew & Ahmad Zubaidi Baharumshah & Chin-Hong Puah, 2009. "Monetary Model of Exchange Rate for Thailand: Long-run Relationship and Monetary Restrictions," Global Economic Review, Taylor and Francis Journals, vol. 38(4), pages 385-395.
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- F31 - International Economics - - International Finance - - - Foreign Exchange
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-10 (All new papers)
- NEP-CBA-2009-10-10 (Central Banking)
- NEP-MON-2009-10-10 (Monetary Economics)
- NEP-SEA-2009-10-10 (South East Asia)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lee Chin & M. Azali & Zulkornain Yusop & Mohammed Yusoff, 2007. "The monetary model of exchange rate: evidence from The Philippines," Applied Economics Letters, Taylor and Francis Journals, vol. 14(13), pages 993-997.
- Swarna Dutt & Dipak Ghosh, 2000. "An empirical note on the monetary exchange rate model," Applied Economics Letters, Taylor and Francis Journals, vol. 7(10), pages 669-671.
- Liew, Venus Khim-Sen, 2009.
"Linear and nonlinear monetary approaches to the exchange rate of the Philippines peso-Japanese yen,"
15550, University Library of Munich, Germany, revised 05 Jun 2009.
- Venus khim-sen Liew, 2009. "Linear and nonlinear monetary approaches to the exchange rate of the Philippines peso-Japanese yen," Economics Bulletin, AccessEcon, vol. 29(2), pages 1320-1329.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
- Abbott, Andrew & De Vita, Glauco, 2002. "Testing the long-run structural validity of the monetary exchange rate model," Economics Letters, Elsevier, vol. 75(2), pages 157-164, April.
- Frenkel, Jacob A, 1976. " A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 200-224.
- Ahmad Zubaidi Baharumshah & Siti Hamizah Mohd & Sung Ahn, 2009. "On the predictive power of monetary exchange rate model: the case of the Malaysian ringgit/US dollar rate," Applied Economics, Taylor & Francis Journals, vol. 41(14), pages 1761-1770.
- Long, Dara & Samreth, Sovannroeun, 2008.
"The Monetary Model of Exchange Rate: Evidence from the Philippines Using ARDL Approach,"
9822, University Library of Munich, Germany.
- Sovannroeun SAMRETH & Dara LONG, 2008. "The Monetary Model of Exchange Rate: Evidence from the Philippines Using ARDL Approach," Economics Bulletin, AccessEcon, vol. 6(31), pages 1-13.
- Frank Agbola & Chartri Kunanopparat, 2005. "Determinants of exchange rate practices: some empirical evidence from Thailand," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 807-816.
- repec:ebl:ecbull:v:6:y:2008:i:31:p:1-13 is not listed on IDEAS
- MacDonald, Ronald & Taylor, Mark P., 1991. "The monetary approach to the exchange rate : Long-run relationships and coefficient restrictions," Economics Letters, Elsevier, vol. 37(2), pages 179-185, October.
- Tatsuyoshi Miyakoshi, 2000. "The monetary approach to the exchange rate: empirical observations from Korea," Applied Economics Letters, Taylor and Francis Journals, vol. 7(12), pages 791-794.
- Rapach, David E. & Wohar, Mark E., 2002. "Testing the monetary model of exchange rate determination: new evidence from a century of data," Journal of International Economics, Elsevier, vol. 58(2), pages 359-385, December.
- Cheung, Yin-Wong & Lai, Kon S, 1993. "A Fractional Cointegration Analysis of Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 103-12, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.