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Beyond the Purchasing Power Parity: Exchange Rates, Prices and Interest Rates in ASEAN-5 Countries

Jurnal Ekonomi Malaysia

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Title Beyond the Purchasing Power Parity: Exchange Rates, Prices and Interest Rates in ASEAN-5 Countries
 
Creator Halid, Noreha
Janor, Hawati
Mat Nor, Fauzias
 
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Description ABSTRACTThis study examines the association among price, exchange rates and interest rates in ASEAN-5 economies. Several studies have suggested the importance of the linkages between goods and assets market in thedetermination of exchange rates and one way to account for such linkages is to incorporate interest rate and prices. By using cointegration test, we found evidence on the long run relationship among the variables indicating the importance of interest rate and price on exchange ratewhen structural break is considered. The findings thus show that the linkages between goods and assets market found in developed countries has general applicability to other small open economies specifically for Malaysia only when structural break caused by the financial crisis 1997is considered. The diferent in results far the sub period indicate that not only it is important to consider multivariate approach but also the impact of financial crisis in the future research examining exchange rate in ASEAN-5 countries.Key words: purchasing power parity; Johansen cointegration; exchange rate determination; ASEAN economiesABSTRAKKajian ini meneliti perhubungan di antara harga, kadar pertukaran dan kadar faedah bagi ekonorni ASEAN-5. Beberapa kajian menunjukkan betapa pentingnya perkaitan di antara pasaran barangan dan pasaranaset dalam penentuan kadar pertukaran dan salah satu cara untuk mengambilkira perkaitan tersebut ialah dengan memasukkan kadar faedah ke dalam persamaan kadar pertukaran. Melalui ujian kointegrasi, kami menemui bukti yang menunjukkan wujudnya perhubungan jangka panjang di antara pembolehubah-pembolehubah tersebut yang mana rnencerrninkan pentingnya kadar faedah dan hargake atas kadar pertukaran apabila 'structural break' diambilkira.. Penemuan ini menunjukkan bahawa perkaitan di antara pasaran barangan dan aset yang ditemui bagi negara maju juga terpakai bagi ekonomi kecil yang lain terutamanya bagi kes Malaysia apabila mengmbil kira 'structural break' yang disebabkan oleh krisis kewangan1997. Perbezaan dalam hasil penemuan bagi sub jangkamasa menunjukkan penggunaan pendekatan multivariat dan mengambil kira kesan krisis kewangan adalah penting dalam kajian masa depan yang melibatkan penentuan kadar pertukaran dalam negara ASEAN-5.Kata kunci: pariti kuasa beli, kointegrasi Johansen, penentuan kadar pertukaran, ekonomi ASEAN
 
Publisher Universiti Kebangsaan Malaysia
 
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Date 2012-11-05
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
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Format application/pdf
 
Identifier http://ejournal.ukm.my/jem/article/view/1478
 
Source Jurnal Ekonomi Malaysia; Vol 43 (2009): Jurnal Ekonomi Malaysia
0126-1962
 
Language eng
 
Relation http://ejournal.ukm.my/jem/article/view/1478/1288
 
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