马来西亚汇率波动 case study

f exchange rate volatility starts with [6] Optimal Currency Area hypothesis. He shows that countries with relatively large bilateral trade and countries with correlated economic shocks might benefits from a common currency. According to the fitted GARCH (Generalized Auto-Regressive Conditional Heteroscedasticity) models, the exchange rate variance is persistent and serially correlated [7, 8]. Thus current and past volatility of exchange rates can be used to predict future volatility. However, trajectories with nearly identical initial conditions can differ a lot from each other [9].

There is, indeed, a substantial amount of research about the effects of volatility of a country’s own real exchange on certain macroeconomic variables. Higher volatility of the real exchange rate hurt exports in a large group of developing countries [10]. Recent and stronger evidence of a negative impact of exchange rate volatility on trade flows can be found in [11] and [12]. While [13] suggested that the financial variables such as external debt also affect optimal exchange rate volatility.

It is an explanatory variable that explained the sensitivity of the exchange rate due to the changes in interest rate. The more popular intervention tool in the exchange rate is changing interest rate [14]. Irving Fisher, an American economist, developed a theory relating exchange rates to interest rates. Interest rate differentials tend to reflect exchange rate expectations which also known as Fisher Effect. In a study by [15], The International Fisher Effect (IFE) theory explained the derivation of relationship of the actual return to investors in home country is the foreign interest rate and the change in the foreign currency value [16].

Most studies have been tested and analyzed the influence of interest rate differentials on change in exchange rates based on the IFE theory and previous studies [4] therefore [1] states that high real interest rate is successful in curbing exchange rate volatility. According to the journal written by [17], The common external factors influencing the stock return would be stock prices in global economy, the exchange rate and the interest rate, for instance, capital inflows are not determined by domestic interest rate only but also by changes in the interest rate by major economies in the world. Thus, the single economy evidence revives the more reasonable hypothesis that exchange rate volatility is fundamentally negatively correlated with interest rate.

An empirical study [18] by using existence of threshold effects in the relationship between inflation rate and growth rate of GDP in the context of Malaysia shows that below the threshold level, there is a statistically significant positive relationship between inflation rate and growth. New evidence from a Dynamic Panel Threshold Analysis by [19], applying the dynamic panel threshold model to the analysis of thresholds in the inflation-growth nexus.They provided new evidence on the non-linear relationship between inflation and long-term economic growth. However, the correlation remains insignificant.

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