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Monetary exchange rate model: supportive evidence from nonlinear testing procedures

Author

Listed:
  • Liew, Venus Khim-Sen
  • Baharumshah, Ahmad Zubaidi
  • Habibullah, Muzafar Shah
  • Midi, Habshah

Abstract

Using nonlinear testing procedures relevant to the recent literature, this study provides evidence of nonlinear adjustment of nominal exchange rate towards monetary fundamentals in the context of ASEAN-5 countries. While it supports earlier findings supportive of monetary exchange rate model in this region using the linear testing procedures, this study provides insightful information in explaining why persistent misalignments between nominal exchange rate and monetary fundamentals are often observed in the sample data.

Suggested Citation

  • Liew, Venus Khim-Sen & Baharumshah, Ahmad Zubaidi & Habibullah, Muzafar Shah & Midi, Habshah, 2008. "Monetary exchange rate model: supportive evidence from nonlinear testing procedures," MPRA Paper 7293, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:7293
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    File URL: https://mpra.ub.uni-muenchen.de/7293/1/MPRA_paper_7293.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Wong, KKS & Chin, Lee & Azali, M, 2015. "Yen Synchronization among ASEAN-5, Korea and Japan: Evidence from The Multivariate GARCH Model," MPRA Paper 96863, University Library of Munich, Germany.

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    More about this item

    Keywords

    monetary model; exchange rate; nonlinear; unit root test; linearity test; STAR model;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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