Tests of the Different Variants of the Monetary Model in a Developing Economy: Malaysian Experience in the Pre- and Post-crisis Periods

Chin, Lee and Azali, M and Masih, Mansur (2009): Tests of the Different Variants of the Monetary Model in a Developing Economy: Malaysian Experience in the Pre- and Post-crisis Periods. Published in: Applied Economics , Vol. 15, No. 41 (2009): pp. 1893-1902.

Abstract

This study examines the validity of four different variants of the monetary model of exchange rate determination for Malaysia covering both the pre- and post-crisis periods using the vector error-correction models. The findings demonstrate that for both periods, the variables used are cointegrated. Tests tend to suggest that of the four variants of monetary model, the sticky-price model holds in both periods and the flexible-price model holds only in the post-crisis period. The proportionality between the exchange rate and relative money does not hold in any period. The plotted actual and fitted exchange rates for both sub-samples show that the models are able to track the actual exchange rate trend quiet well.

• Item Type: MPRA Paper
• Language: English
• Keywords: exchange rate, Malaysia
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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