Study on the Effect of Economic Factors on the Malaysian Exchange Rate

The impact of economic variables on the volatility of the Malaysian exchange rate must be investigated since the value of the Malaysian currency is declining. The World Development Indicators (WDI) gathered yearly time series data on GDP, unemployment rates, and currency exchange rates. The information on inflation rates was given by Malaysia’s Ministry of Statistics. 120 observations were examined using the Eviews programme between 1989 and 2018. Descriptive statistics initially establish the mean, minimum, maximum kurtosis, skewness, and standard deviation of the data. Using the Phillips-Perron (P.P.) and Augmented Dickey-Fuller (ADF) approaches, data stationarity is examined. You can determine whether there is a relationship between the two variables using a correlation test. Multiple regression analysis is used to analyse the influence and significance of the connection between the variables. The information reveals a strong relationship between GDP and the exchange rate. GDP, inflation, and the exchange rate are closely correlated. In times of high unemployment, the exchange rate declines. However, this study found that neither unemployment nor inflation had an impact on the volatility of the exchange rate. To maintain the stability of the Ringgit, Malaysia must review its monetary policies.

Author(s) Details:

Suhana Mohamed,
Faculty of Business and Management, Universiti Teknologi MARA, Johor Branch, Pasir Gudang Campus, Johor, Malaysia.

Meezatulakma Abdullah,
Faculty of Business and Management, Universiti Teknologi MARA, Johor Branch, Pasir Gudang Campus, Johor, Malaysia.

Siti Salwa Hassan,
Faculty of Business and Management, Universiti Teknologi MARA, Sarawak Branch, Samarahan Campus, Sarawak, Malaysia.

Wan Muhd Faez Wan Ibrahim,
Faculty of Business and Management, Universiti Teknologi MARA, Sarawak Branch, Samarahan Campus, Sarawak, Malaysia.

Mohamad Azwan Md Isa,
Faculty of Business and Management, Universiti Teknologi MARA, Johor Branch, Segamat Campus, Johor, Malaysia.

Ferri Nasrul,
Faculty of Business and Management, Universiti Teknologi MARA, Johor Branch, Segamat Campus, Johor, Malaysia.

Mohd Khairul Ariff Noh,
Faculty of Business and Management, Universiti Teknologi MARA, Johor Branch, Segamat Campus, Johor, Malaysia.

Please see the link here: https://stm.bookpi.org/CABEF-V1/article/view/7298

Keywords: Impact, economic factors, exchange rates, determinants, factors.

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