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The Predictability of ASEAN-5 Exchange Rates

  • Ahmad Zubaidi Baharumshah

    (Universiti Putra Malaysia)

  • Liew Khim Sen

    (Universiti Putra Malaysia)

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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File URL: http://128.118.178.162/eps/if/papers/0307/0307004.pdf
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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
Note: Type of Document - pdf
Contact details of provider: Web page: http://128.118.178.162

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  5. 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.
  6. 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.).
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  8. Liew, Venus Khim-Sen & Shitan, Mahendran & Hussain, Huzaimi, 2000. "Time series modelling and forecasting of Sarawak black pepper price," MPRA Paper 791, University Library of Munich, Germany.
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