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The Predictability of ASEAN-5 Exchange Rates

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Author Info

  • Ahmad Zubaidi Baharumshah

    (Universiti Putra Malaysia)

  • Liew Khim Sen

    (Universiti Putra Malaysia)

Abstract

In an attempt to determine the predictability of ASEAN exchange rates, five currencies including Malaysian ringgit, Thailand baht, Singapore dollar, Indonesian rupiah and the Philippines peso, denominated in US dollar as well as Japanese yen, were modeled using advanced time series analysis. Results suggested that Singapore exchange rate could be better predicted when denominated in US dollar, most probably because the East Asian Financial Crisis did not affect them both. On the other hand, other Asean exchange rates were better predicted when denominated in Japanese yen, as they had closer economic ties with Japan. However, while Japan had undergone serious recession after the crisis, it did not experience dramatic political instability as experienced by Indonesia, hence Indonesian rupiah remained unpredictable by yen. These results show that although advanced time series analysis dealt with economic fundamentals implicitly; it still could be a powerful tool for exchange rates modeling and forecasting, especially in the medium to long term.

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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0307004.

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Date of creation: 23 Jul 2003
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Handle: RePEc:wpa:wuwpif:0307004

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Web page: http://128.118.178.162

Related research

Keywords: Exchange rate; ASEAN-5; predictibility; ARIMA;

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References

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  1. Lorenzo Giorgianni & Jeremy Berkowitz, 1997. "Long - Horizon Exchange Rate Predictability?," IMF Working Papers 97/6, International Monetary Fund.
  2. Jeremy Berkowitz & Lorenzo Giorgianni, 1996. "Long-horizon exchange rate predictability?," Finance and Economics Discussion Series 96-39, Board of Governors of the Federal Reserve System (U.S.).
  3. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
  4. Cheung, Yin-Wong, 1993. "Long Memory in Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 93-101, January.
  5. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
  6. Su Zhou, 1998. "Exchange rate systems and linkages in the pacific basin," Atlantic Economic Journal, International Atlantic Economic Society, vol. 26(1), pages 66-84, March.
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Cited by:
  1. Ahmad Zubaidi Baharumshah & Liew Khim Sen & Lim Kian Ping, 2003. "Exchange Rates Forecasting Model: An Alternative Estimation Procedure," International Finance 0307005, EconWPA.

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