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Exchange Rate Misalignment, Volatility and Import Flows in Malaysia

Author

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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.

Suggested Citation

  • Naseem, N.A.M & Tan, Hui-Boon & Hamizah, M.S, 2008. "Exchange Rate Misalignment, Volatility and Import Flows in Malaysia," MPRA Paper 41571, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41571
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    Cited by:

    1. n.a.m, Naseem & m.s, Hamizah, 2013. "Exchange Rate Misalignment and Economic Growth: Recent Evidence in Malaysia," MPRA Paper 52447, University Library of Munich, Germany.
    2. Irina Tarasenko, 2021. "The impact of exchange rate volatility on trade: The evidence from Russia," Russian Journal of Economics, ARPHA Platform, vol. 7(3), pages 213-232, December.
    3. Komain Jiranyakul, 2013. "Exchange Rate Uncertainty and Import Demand of Thailand," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(10), pages 1269-1280, October.
    4. Daren Conrad & Jaymieon Jagessar, 2018. "Real Exchange Rate Misalignment and Economic Growth: The Case of Trinidad and Tobago," Economies, MDPI, vol. 6(4), pages 1-23, September.

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    More about this item

    Keywords

    Real Exchange Rate Misalignment; Volatility; Asian Financial Crisis and ARDL Bounds Test;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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