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

Chin Lee (), M Azali and Mansur Masih

MPRA Paper from University Library of Munich, Germany

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.

Keywords: exchange rate; Malaysia (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2009
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Published in Applied Economics 41.15(2009): pp. 1893-1902

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Related works:
Journal Article: Tests of the different variants of the monetary model in a developing economy: Malaysian experience in the pre- and post-crisis periods (2009)
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