The Effect of Exchange Rates on Economic Growth: Empirical Testing on Nominal Versus Real

The IUP Journal of Financial Economics, Vol. X, No. 1, pp. 7-17, March 2012

Posted: 3 Oct 2012

See all articles by Mori Kogid

Mori Kogid

Universiti Malaysia Sabah

Rozilee Asid

affiliation not provided to SSRN

Jaratin Lily

affiliation not provided to SSRN

Dullah Mulok

Universiti Malaysia Sabah

Nanthakumar Loganathan

University Sultan Zainal Abidin

Date Written: October 3, 2012

Abstract

This study attempts to investigate the effects of the exchange rates on economic growth in Malaysia using time series data spanning from 1971 to 2009. Both exchange rates, nominal and real, are considered to have similar effects on economic growth. The results of ARDL bounds test suggest that long-run cointegration exists between both nominal and real exchange rates and economic growth with a significant positive coefficient recorded for real exchange rate. In addition, the results of ECM-based ARDL also reveal that both exchange rates have a similar causal effect towards economic growth. Considering the importance of exchange rate variables, especially the real term, these findings eventually suggest that a systematic exchange rate via monetary policy should be properly developed to promote the stability and sustainability of economic growth in Malaysia.

Suggested Citation

Kogid, Mori and Asid, Rozilee and Lily, Jaratin and Mulok, Dullah and Loganathan, Nanthakumar, The Effect of Exchange Rates on Economic Growth: Empirical Testing on Nominal Versus Real (October 3, 2012). The IUP Journal of Financial Economics, Vol. X, No. 1, pp. 7-17, March 2012, Available at SSRN: https://ssrn.com/abstract=2156115

Mori Kogid (Contact Author)

Universiti Malaysia Sabah ( email )

P.O. Box 80594
Jalan UMS
Kota Kinabalu, Sabah 88999
Malaysia

Rozilee Asid

affiliation not provided to SSRN ( email )

Jaratin Lily

affiliation not provided to SSRN ( email )

Dullah Mulok

Universiti Malaysia Sabah ( email )

P.O. Box 80594
Jalan UMS
Kota Kinabalu, Sabah 88999
Malaysia

Nanthakumar Loganathan

University Sultan Zainal Abidin ( email )

Kampus Gong Badak
Kuala Terengganu, 20400
Malaysia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
824
PlumX Metrics