English, Article edition: On the predictive power of monetary exchange rate model: the case of the Malaysian ringgit/US dollar rate Ahmad Zubaidi Baharumshah; Siti Hamizah Mohd; Sung Ahn

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Physical Description
  • article
Language
  • English

Edition details

Title
  • On the predictive power of monetary exchange rate model: the case of the Malaysian ringgit/​US dollar rate
Author
  • Ahmad Zubaidi Baharumshah
  • Siti Hamizah Mohd
  • Sung Ahn
Physical Description
  • article
Notes
  • The predictive power of the monetary model for the Malaysian ringgit/​US dollar (RM/​USD) rate is analysed using quarterly data ending in 2006:Q3. We find compelling evidence of a long-run relationship between exchange rates and the economic fundamental determinant. Macroeconomic factors systematically affect the long-run movement of the RM/​USD rate. Additionally, the RM/​USD rate was overvalued by about 10% several quarters before the 1997 crisis; after the crisis, rates fluctuated close to the equilibrium value. The out-of-sample forecasts demonstrate that the monetary model outperforms the naive random walk model. The monetary and Purchasing Power Parity (PPP) models do well at the four to eight quarters horizon.
  • RePEc:taf:applec:v:41:y:2009:i:14:p:1761-1770
Language
  • English
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