ISSN: 2226-3624
Open access
As the exchange rate is currently floating negatively in Malaysia, there is a need to investigate the impact of economic factors on Malaysia's exchange rate volatility. In this study, the annual time series data for foreign exchange rates, gross domestic product and unemployment rates obtained from the World Development Indicators (WDI) source. The data for inflation rates sourced from the Department Statistic of Malaysia website. The 120 observations data tested from 1989 to 2018 using Eviews software. First, the data analyzed based on the descriptive statistics measure the mean, minimum, maximum, kurtosis, and skewness of the data or variables. The Augmented Dickey-Fuller (ADF) and Phillips-Perron (P.P.) used to test the data stationarity. The correlation test is performed to investigate any correlation between the variables. Lastly, the multiple regression analysis examines the impacts and significance of the relationship between the variables. The findings demonstrate that there is a strong significant relationship between gross domestic product and exchange rate. However, unemployment and inflation show an insignificant relationship with exchange rate volatility. There is a strong significant relationship between gross domestic product, inflation with the exchange rate. However, unemployment shows an insignificant relationship with the exchange rate. This study indicated economic factors that increase gross domestic product and inflation, significantly impacting the exchange rate. To maintain Malaysia's exchange rate stability, Malaysia needs to look into their monetary policy closely.
Ariff, M., & Yanti, S. (1999). The Malaysian Financial Crisis: Economic Impact and Recovery Prospects. The Developing Economies, XXXVII-4, 417-438. Retrieved from https://www.ide.go.jp/library/English/Publish/Periodicals/De/pdf/99_04_03.pdf
Choi, Y., & Choi, E. K. (2018). Unemployment and optimal exchange rate in an open economy. Economic Modelling, 69, 82–90. Retrieved from https://doi.org/10.1016/j.econmod.2017.09.009
Doukas, J., & Lifland, S. (2008). Exchange Rates and the Role of the Trade Balance Account. Managerial Finance, 20(5), 67–78. https://doi.org/10.1108/eb018476
Feldmann, H. (2011). The unemployment effect of exchange rate volatility in industrial countries. Economics Letters, 111(3), 268–271. https://doi.org/10.1016/j.econlet.2011.01.003
Fu, T., & Lin, M. (2012). Interest rate, unemployment rate China's and China's exchange rate regime. https://doi.org/10.1108/17468801211209947
Greenaway, R., Mark, N. C., Sul, D., & Wu, J. L. (2012). Exchange Rates as Exchange Rate Common Factors.
Khan, I. (2016). Factors Affecting Exchange Rate: A case of Pakistan. (75209).
Khan, R. S. A. (2014). Raja Sher Ali Khan. 16(6), 115–121.
Mahmood, I., Ehsanullah, M., & Ahmed, H. (2011). Exchange Rate Volatility & Macroeconomic Variables in Pakistan © Society for Business and Management Dynamics © Society for Business and Management Dynamics. 1(2), 11–22.
Majeed, M. (2018). Impact of GDP, unemployment and the current balance on the exchange rate: a study from. 6(June), 37–46.
Maurya, S. (2017). Factors affecting Exchange Rate and its Impact on the Economy of India. (January 2017). https://doi.org/10.5958/2249-7307.2017.00148.7
Mirchandani, A. (2013). Analysis of Macroeconomic Determinants of Exchange Rate Volatility in India. 3(1), 172–179.
My, N. Q., & Sayim, M. (2016). The Impact of Economic Factors on the Foreign Exchange Rates between the USA and Four Big Emerging. 3(1). https://doi.org/10.5296/ifb.v3i1.9108
Parveen, S., Khan, A. Q., & Ismail, M. (2018). Analysis of the Factors Affecting Exchange Rate Variability in Pakistan analysis of the factors affecting the exchange rate. (January 2012).
Patel, P. P. J., Patel, N. J., & Patel, A. R. (2014). Factors affecting Currency Exchange Rate, Economical Formulas and Prediction Models. 3(3), 53–56.
Ramasamy, R., & Abar, S. K. (2015). Influence of Macroeconomic Variables on Exchange Rates. 3(2), 276–281. https://doi.org/10.7763/JOEBM.2015.V3.194
Ran, J., & Zhou, Y. (2012). Transmitted unemployment under the linked exchange rate system: Evidence from Hong Kong. Economics Letters, 117(1), 131–133. https://doi.org/10.1016/j.econlet.2012.04.096
Venkatesan, T., & Ponnamma, M. S. (2017). An Analysis of Macroeconomic Factors Affecting Foreign Exchange Rate. 21–30. https://doi.org/10.18311/sdmimd/2017/15716.
Yanti, S. A. B. (2002). Migrant labour in Malaysia: Impact and implication of the Asian financial crisis. EADN Regional Project on the Social Impact of the Asian Financial Crisis.Retrieved from http://www.eadn.org/Migrant%20Labour%20in%20Malaysia% 20Impact%20and%20Implications%20of%20the.pdf
In-Text Citation: (Mohamed et al., 2021)
To Cite this Article: Mohamed, S., Abdullah, M., Noh, M. K. A., Isa, M. A. M., Hassan, S. S., Ibrahim, W. M. F. W., & Nasrul, F. (2021). Impact of Economic Factors towards Exchange Rate in Malaysia. International Journal of Academic Research in Economics and Managment and Sciences, 10(1), 75-84.
Copyright: © 2021 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode