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

Authors

  • 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.

DOI:

https://doi.org/10.9734/bpi/cabef/v1/3054B

Keywords:

Impact, economic factors, exchange rates, determinants, factors

Abstract

As the Malaysian currency is depreciating, economic factors' influence on the volatility of the Malaysian exchange rate must be explored. The World Development Indicators (WDI) compiled annual time series data on currency exchange rates, GDP, and unemployment rates. The Ministry of Statistics of Malaysia provided the data for inflation rates. From 1989 to 2018, 120 observations were tested with the Eviews software. In the first place, descriptive statistics determine the data's mean, minimum, maximum kurtosis, skewness, and standard deviation. Data stationarity is tested using the Phillips-Perron (P.P.) and Augmented Dickey-Fuller (ADF) techniques. Using a correlation test, you may find out if there's a link between the two variables. Finally, the impact and significance of the association between the variables are examined by multiple regression analysis. The data shows a substantial correlation between GDP and the exchange rate. There is a strong correlation between GDP, inflation, and the exchange rate. When unemployment is high, the exchange rate falls. However, according to this study, unemployment and inflation do not affect the volatility of the currency rate. Malaysia must reassess its monetary policy to keep the Ringgit steady.

Published

2022-06-21

How to Cite

Suhana Mohamed, Meezatulakma Abdullah, Siti Salwa Hassan, Wan Muhd Faez Wan Ibrahim, Mohamad Azwan Md Isa, Ferri Nasrul, & Mohd Khairul Ariff Noh. (2022). Study on the Effect of Economic Factors on the Malaysian Exchange Rate. Current Aspects in Business, Economics and Finance Vol. 1, 42–52. https://doi.org/10.9734/bpi/cabef/v1/3054B

Issue

Current Aspects in Business, Economics and Finance Vol. 1

Section

Chapters