IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Sectoral Effects Of Ringgit Depreciation Shocks

  • Mansor H. Ibrahim

    ()

    (Department of Economics, International Islamic University Malaysia)

The paper seeks to address two important questions-namely, is exchange rate depreciation expansionary or contractionary and are there distributional consequences of exchange rate shocks for the case of Malaysia? In the paper, we consider the relations between aggregate output as well as eight sectoral outputs and real effective exchange rate in multivariate setting. Applying multivariate cointegration test, we find evidence for cointegration among the variables for all sectors. More importantly, both real output (aggregate output as well as all sectoral output) and real exchange rate contribute significantly to the cointegration space, affirming the presence of long run relations between the two focused variables. In most cases, the estimated cointegrating vectors suggest expansionary currency depreciation. Our simulated dynamics using generalized impulse responses further substantiate this finding especially over longer horizons. Over shorter horizons, however, exchange rate depreciation can be contractionary for certain sectors particularly for the construction sector. Lastly, we also find evidence indicative of the differential effects of the currency shocks. Comparatively, the manufacturing sector, transport, storage and communication sector, and finance, insurance, real estates and business services sector seem to be affected more by exchange rate fluctuations.

If 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.

File URL: http://www.jed.or.kr/full-text/32-2/6.pdf
Download Restriction: no

Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 32 (2007)
Issue (Month): 2 (December)
Pages: 135-156

as
in new window

Handle: RePEc:jed:journl:v:32:y:2007:i:2:p:135-156
Contact details of provider: Web page: http://www.jed.or.kr/

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Gylfason, Thorvaldur & Radetzki, Marian, 1991. "Does Devaluation Make Sense in the Least Developed Countries?," Economic Development and Cultural Change, University of Chicago Press, vol. 40(1), pages 1-25, October.
  2. Thorvaldur Gylfason & Michael Schmid, 1983. "Does Devaluation Cause Stagflation?," Canadian Journal of Economics, Canadian Economics Association, vol. 16(4), pages 641-54, November.
  3. Jack A. Tatom, 1987. "Will a weaker dollar mean a stronger economy?," Working Papers 1986-011, Federal Reserve Bank of St. Louis.
  4. Kandil, Magda & Mirzaie, Aghdas, 2002. "Exchange rate fluctuations and disaggregated economic activity in the US: theory and evidence," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 1-31, February.
  5. Solimano, Andres, 1986. "Contractionary devaluation in the southern cone : The case of Chile," Journal of Development Economics, Elsevier, vol. 23(1), pages 135-151, September.
  6. Upadhyaya, Kamal P., 1999. "Currency devaluation, aggregate output, and the long run: an empirical study," Economics Letters, Elsevier, vol. 64(2), pages 197-202, August.
  7. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
  8. Gylfason, Thorvaldur & Risager, Ole, 1984. "Does devaluation improve the current account?," European Economic Review, Elsevier, vol. 25(1), pages 37-64, June.
  9. Kamal Upadhyaya & Mukti Upadhyay, 1999. "Output effects of devaluation: Evidence from Asia," Journal of Development Studies, Taylor & Francis Journals, vol. 35(6), pages 89-103.
  10. Selover, David D. & Round, David K., 1996. "Business cycle transmission and interdependence between Japan and Australia," Journal of Asian Economics, Elsevier, vol. 7(4), pages 569-602.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:jed:journl:v:32:y:2007:i:2:p:135-156. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Changhui Kang)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.