A Cointegration of the Exchange Rate and Macroeconomic Fundamentals: The Case of the Indonesian Rupiah vis-á-vis Currencies of Primary Trade Partners

Salim, Agus; Shi, Kai

doi:10.3390/jrfm12020087

Cited by 9 publications

(5 citation statements)

References 35 publications

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“…Thus, macroeconomic variables exist, in this case, the rupiah alternate rate. This is proper for searches performed by way of (Kumar, 2019), (Healy and Wahlen, 2005), (Nurmakhanova and Katenova, 2019), (Salim and Shi, 2019), (Rangkuty et al, 2021).…”

Section: Discussionmentioning

confidence: 99%

Crude Oil Prices and Currency Exchange Rates’ Impact on the Indonesian Energy Stock Market during the Covid-19 Pandemic

Alexandri

Sari

Sumadinata

2022

IJEEP

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This study examines the effect of oil prices and currency exchange rates on the Indonesian Energy Stock Market, which was listed on the Indonesian Stock Exchange from 2020 to 2022. The purpose of this study is to select samples from the entire population. This study employed the ADF and Zivot-Andrews (1992) unit root test analyses. To begin, causality between the variables was established. The data suggested that alternate fees, closing price, and trade rat are causally related. The VAR method was used to investigate the short-term effects of the variables At the same time, oil prices have a beneficial effect on closing costs, trading prices experience closing post costs and Currency Exchange Rate prices During the Covid-19 Pandemic.

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Section: Discussionmentioning

confidence: 99%

Crude Oil Prices and Currency Exchange Rates’ Impact on the Indonesian Energy Stock Market during the Covid-19 Pandemic

Alexandri

Sari

Sumadinata

2022

IJEEP

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“…Edwards (1988) proposes that exchange rate fundamentals in developing economies are terms of trade, government consumption, technological progress and capital inflows. However, further research on exchange rate misalignment shows that other macroeconomic factors, such as external debt, trade openness and capital formation are important determinants of the REER (Gouider and Nouira 2014;Hossain 2011;Pham and Delpachitra 2015;Salim and Shi 2019). Following Edwards (1988) and Hossain (2011), the relative impact of the exchange rate fundamentals for Botswana is specified as follows:…”

Section: Methodsmentioning

confidence: 99%

Exchange Rate Misalignment and Capital Flight from Botswana: A Cointegration Approach with Risk Thresholds

Bosupeng

Dzator

Nadolny³

2019

SSRN Journal

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This study investigates the impact of exchange rate misalignment on outward capital flight in Botswana over the period 1980-2015. The study uses the autoregressive distributed lag (ARDL) approach to cointegration and the Toda and Yamamoto (1995) approach to Granger causality. Botswana's currency misalignment was caused by current account imbalances. The most important determinant of capital flight from Botswana is trade openness, which indicates that exportable commodities are misinvoiced leading to net capital outflows. Our main findings show that in the long-run, when the currency is overvalued, the volume of capital flight through trade misinvoicing declines and increasing foreign reserves does not reduce outward capital flight. However, when the currency is undervalued, the volume of capital flight through trade misinvoicing increases and foreign reserves reduce outward capital flight. Investors respond more to prospects of devaluation than to inflation. Botswana should tolerate overvaluation of the pula of only up to 5%. When the pula is overvalued beyond 5%, capital flight increases substantially. The government has to formulate trade regulations and monitor imported and exported commodities. Botswana should also implement capital controls to limit capital smuggling and maintain monetary autonomy. ). This study evaluates the impact of exchange rate misalignment on capital flight from Botswana over the period 1980-2015. The country aims to attract capital inflows to develop economic sectors other than mining. Botswana is unique because unlike other developing economies, it used only the fixed exchange rate regime since 1976. There has been no exchange rate regime change and the country has experienced significant undervaluation and overvaluation of the currency. It is conceivable that such misalignment has an impact on outward capital flight in Botswana. Botswana needs capital inflows for economic diversification, therefore, it is imperative to determine the impact of misalignment on capital flight from Botswana.This study empirically investigates the impact of exchange rate misalignment on capital flight from Botswana. The examination contributes to the literature in two important ways. First, previous studies posit that the pula is overvalued but there is no study that evaluates the impact of exchange rate misalignment on capital flight from Botswana. The present study aims to fill this gap. The results of this study are important for implementing macroeconomic policies that support capital inflows for economic diversification in Botswana. Further, the World Bank (2019) indicates that Botswana's diamond mines will be depleted by 2030. In the absence of diamonds, Botswana's economic growth will decline drastically. Correcting exchange rate misalignment is necessary for early economic diversification and sustainable economic growth without diamonds.Second, this investigation extends Gouider and Nouira (2014) methodological approach to misalignment. Gouider and Nouira (2014) defined overvaluation and underva...

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“…Nonetheless, the ARDL model does not detect the non-linear relationship that considers positive and negative changes in economic or political agents to respond to positive or negative occurrences (Tursoy et al, 2018). Therefore, it is vital to employ the NARDL approach as a complement to the ARDL model (Faisal et al, 2018;Luqman & Kouser, 2018;Salim & Shi, 2019). The NARDL model is designed to create a simultaneously asymmetric non-linear autoregressive model and to create a cointegration of the chosen variables in a single equation model.…”

Section: Nonlinear Ardl Approach (Nardl)mentioning

confidence: 99%

Hot Money and Stock Market in China: Empirical Evidence from ARDL and NARDL Approaches

Yii

Tan

et al. 2021

IJBS

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This study discusses the relationship between hot money and stock market in China by employing the Autoregressive Distributed Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL) methods. The data used in this study is quarterly data over the period 2000: Q1 to 2017: Q4. The results show that oil price, economic growth and hot money possess a long-run relationship towards stock market in China, whereas, no effect is found from inflation. The oil price and economic growth are both positively related to stock market while there is a negative relationship from hot money. Furthermore, the study supports the existence of an asymmetric effect between hot money and stock market. The findings imply that policymakers should form better monitoring systems to control the inflow of hot money, thus, strengthening investors’ confidence and avoiding unwanted bubbles in China’s stock market.

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A Cointegration of the Exchange Rate and Macroeconomic Fundamentals: The Case of the Indonesian Rupiah vis-á-vis Currencies of Primary Trade Partners

Cited by 9 publications

References 35 publications

Crude Oil Prices and Currency Exchange Rates’ Impact on the Indonesian Energy Stock Market during the Covid-19 Pandemic

Crude Oil Prices and Currency Exchange Rates’ Impact on the Indonesian Energy Stock Market during the Covid-19 Pandemic

Exchange Rate Misalignment and Capital Flight from Botswana: A Cointegration Approach with Risk Thresholds

Hot Money and Stock Market in China: Empirical Evidence from ARDL and NARDL Approaches

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