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Exchange Rate Misalignment, Volatility and Import Flows in Malaysia

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  • Naseem, N.A.M
  • Tan, Hui-Boon
  • Hamizah, M.S

Abstract

This paper investigates the effect of real exchange rate misalignment and volatility on Malaysian import flows during 1991:Q1 to 2003:Q4. A measure of the quantitative proxy of the real exchange rate misalignment is constructed using the Natural Real Exchange Rate (NATREX) equilibrium model, whereas the volatility of real exchange rate is generated from the GARCH model. This paper differs from existing literature as the effects of exchange rate misalignment significantly hastened the level of Malaysian imports for period of the study. The empirical results also show that the exchange rate volatility has merely promoted the Malaysian imports during the crisis period. This suggests that the exchange rate misalignment and volatility are important determinants in inspiring Malaysian import flows, especially during the 1997 Asian financial crisis.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41571.

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Date of creation: 2008
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Publication status: Published in Int. Journal of Economics and Management 3.1(2009): pp. 130-150
Handle: RePEc:pra:mprapa:41571

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Keywords: Real Exchange Rate Misalignment; Volatility; Asian Financial Crisis and ARDL Bounds Test;

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