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Real exchange rate misalignment and economy

Author

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  • Hock Tsen Wong

Abstract

Purpose - The purpose of this paper is to examine the impact of real exchange rate misalignment on economy and economic sectors, namely construction, manufacturing and mining and quarrying in Malaysia. Design/methodology/approach - The equilibrium real exchange rate and economic models are estimated using the autoregressive distributed lag approach. Findings - An increase in productivity differential or reserve differential will lead to an appreciation of real exchange rate in the long run. An increase in positive (negative) real exchange rate misalignment will lead to an increase (decrease) in economy. An increase in long-run real exchange rate misalignment will lead to a decrease in economy. Real exchange rate misalignment or long-run real exchange rate misalignment can influence the manufacturing sector in Malaysia. More specifically, undervaluation will promote whereas overvaluation will hurt the manufacturing sector. Originality/value - Real exchange rate misalignment can be a policy to influence economy but may not be the best choice.

Suggested Citation

  • Hock Tsen Wong, 2019. "Real exchange rate misalignment and economy," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 46(1), pages 211-227, January.
    • Handle: RePEc:eme:jespps:jes-07-2017-0181
    DOI: 10.1108/JES-07-2017-0181
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    Citations

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    Cited by:

    1. Bošnjak Mile & Kordić Gordana & Novak Ivan, 2021. "Real Effective Exchange Rate and Industrial Productivity in Croatia: Wavelet Coherence Analysis," South East European Journal of Economics and Business, Sciendo, vol. 16(1), pages 30-37, June.
    2. Sabrine Ferjani & Sami Saafi & Ridha Nouira & Christophe Rault, 2022. "The Impacts of the Dollar-Renminbi Exchange Rate Misalignment on the China-United States Commodity Trade: An Asymmetric Analysis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(3), pages 507-554, September.

    More about this item

    Keywords

    Malaysia; Economy; Economic sectors; Real exchange rate misalignment; F31; F37; F41;
    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
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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