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The monetary approach to exchange rate determination for Malaysia

2007; Chapman and Hall London; Volume: 3; Issue: 2 Linguagem: Inglês

10.1080/17446540600993845

1744-6554

Lee Chin, M. Azali, Kent Matthews,

Islamic Finance and Banking Studies

Abstract This article uses alternative versions of the monetary approach to exchange rate determination to explain the Malaysian-ringgit-USD exchange rate during the recent past. The result shows that in general the estimated coefficients of money and income differentials are consistent with all variants of monetary model. In particular, the evidence strongly supports the Bilson's version of the monetary approach. Notes 1 For a comprehensive discussion on exchange rate models, see MacDonald and Taylor (Citation1992) and Taylor (Citation1995). 2 For instance, MacDonald and Taylor (Citation1991, Citation1993, Citation1994a, Citationb), Kouretas (Citation1997), Diamandis et al. (Citation1998), Makrydakis (Citation1998), Reinton and Ongena (Citation1999), Miyakoshi (Citation2000), Hwang (Citation2001), Tawadros (Citation2001) and Civcir (Citation2003) had found evidence in favour of the monetary model for a number of currencies. 3 Refer Frankel and Koske (Citation2004) for more detail.