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The Effects of Trade Openness on Malaysian Exchange Rate

Author

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  • Lee, Chin
  • Law, Chee-Hong

Abstract

This study investigates the impact of trade openness on Malaysian exchange rate. The findings show that most of the variables are statistically significant and carried the expected signs. As predicted by the theory, the rise of the income level and stock market index in Malaysia will lead to the appreciation of domestic currency. On the other hand, the increase in trade openness and interest rate can lead to depreciation of Malaysian Ringgit. In addition, the results suggested that a rise in money supply differential caused RM to appreciate. However, increase in trade balance caused the depreciation of RM.

Suggested Citation

  • Lee, Chin & Law, Chee-Hong, 2013. "The Effects of Trade Openness on Malaysian Exchange Rate," MPRA Paper 45185, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:45185
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    File URL: https://mpra.ub.uni-muenchen.de/45185/1/MPRA_paper_45185.pdf
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    Keywords

    Exchange Rate; Trade Openness; Malaysia;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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