Monetary Model of Exchange Rate for Thailand: Long-run Relationship and Monetary Restrictions

Liew, Venus Khim-Sen and Ahmad Zubaidi, Baharumshah and Puah, Chin-Hong (2008) Monetary Model of Exchange Rate for Thailand: Long-run Relationship and Monetary Restrictions. [Working Paper]

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This paper examines the long-run relationship between exchange rate and its determinants based on the flexible-price monetary model. Multivariate cointegration approach (Johansan 1988, 1989 and Johansen-Juselius 1990) is adopted to attain our objective of study. The empirical results provide evidence favoring the monetary approach to exchange rate for a small and open emerging economy, namely Thailand. In addition, the validity of the underlying assumptions of the monetary approach to the determination of exchange rate is established. The above findings suggest that exchange rate players may effectively monitor and forecast the exchange rate movement via the money supplies, incomes, and interest rates variables of both Thailand and Japan. Besides, one has to follow the economic development of Thailand’s major trading partner, Japan, to understanding the movement of exchange rate for Thailand. Moreover, our findings add new insights to accompaniment previous studies that documented the important influence of US in the emerging Asian economies.

Item Type: Working Paper
Additional Information: Universiti Malaysia Sarawak
Uncontrolled Keywords: UNIMAS, exchange rate, monetary model, Thailand, cointegration
Subjects: A General Works > AC Collections. Series. Collected works
H Social Sciences > HG Finance
H Social Sciences > HJ Public Finance
Divisions: Academic Faculties, Institutes and Centres > Faculty of Economics and Business
Faculties, Institutes, Centres > Faculty of Economics and Business
Depositing User: Karen Kornalius
Date Deposited: 16 Jun 2014 02:58
Last Modified: 13 Jan 2022 08:08

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