Effectiveness of high interest rate policy on exchange rates: A reexamination of the Asian financial crisis

Brailsford, Tim; Penm, Jack Hw; Lai, C. D.

doi:10.1155/jamds/2006/35752

Cited by 6 publications

(2 citation statements)

References 17 publications

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“…(2016) and Bagchi, Chortareas, and Miller (2004) have explained the impact of monetary policy on the changes in value of purchasing power indicators. Moreover, Brailsford et al (2006) also indicate that many Asian countries' exchange rate benefit from the interest rate fluctuation especially during the financial crisis. In addition, Curran and Velic (2019) and Patel and Mah (2018) have found that the monetary policy tools as well as interest rate have a strong causal relationship with the real external purchasing power indicators in the emerging countries.…”

Section: Literature Reviewmentioning

confidence: 99%

The Effects of Interest Rate on Real Effective Exchange Rate Volatility Spillover in Malaysia and Thailand: Empirical Evidence

et al. 2021

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The research examined this asymmetric effect between the interrelationship of the interbank rate on the external competitiveness purchasing power represented by the real effective exchange rate for Malaysia and Thailand using monthly data covering the period of 1994 until 2020. The empirical findings confirms an asymmetric effect between interbank rate and real effective exchange rate based on the nonlinear autoregressive distributed lag estimates. The research also finds a unidirectional asymmetric causal relationship running from real effective exchange rate on interbank rate Thailand, which indicate the monetary policy has a direct relationship on interbank rate volatility. While in Malaysia, there is no causality running between both variables since the country has proposed several soft monetary policies and more concentrating on the short-term borrowing by improving the tight money supply circulation based on the domestic inflation, global economic, and financial market volatility. Therefore, the research recommends a specific need of monetary stabilizer policy to stabilize both countries’ currencies and put more effort to liberalize the foreign exchange rate system in a globalized economy.

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Section: Literature Reviewmentioning

confidence: 99%

The Effects of Interest Rate on Real Effective Exchange Rate Volatility Spillover in Malaysia and Thailand: Empirical Evidence

et al. 2021

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“…Inflation is one of the effects of a prolonged economic crisis that hit a country. An increase in prices that takes place continuously in an extended period, would be followed by a decline of real value of a country's currency (Brailsford, Jack, & Lai, 2006;Chow & Yoonbai, 2006). Generally, the reason of the economic crisis in Indonesia were not caused by weak economic fundamentals, but because of the declining Rupiah exchange rate against the US Dollar.…”

Section: Introductionmentioning

confidence: 99%

Macroeconomic Determinants of Interest Rate Volatility in Indonesia: A Structural VAR Analysis

Salim

2019

International Journal of Applied Economics, Finance and Account

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The determination of interest rates is not only influenced by inflation rate but also the sharing of factors of other macroeconomic variables. The study of the determinants interest rate has developed based on the variability and the methodological concept. Since the purpose of this study is to analyze the effect of macroeconomic variables on the interest rate volatility in Indonesia, we apply ordinary least square to estimates the empirical model of interest rate determinants statically, and the structural VAR analysis dynamically. The result of the estimation reveals that the coefficient estimates of money supply, exchange rate, and the GDP growth have negative and significant effect in the long-run. However, the risk premium shock has positive and significant effect on the interest rate and inflation rate in Indonesia.

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Asymmetric relationship between interest rates and exchange rates: Evidence from Turkey

Karamelikli

Karimi

2020

Int. J Fin Econ

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This paper deals with the dynamic relationship between the interest rate and exchange rate using the data from the Turkish economy. Macroeconomic variables possess both asymmetric and non-linear features; however, most of the empirical research relating to the dynamics of the exchange rate has been conducted only within a linear framework. Therefore, in this paper, a non-linear autoregressive distributed lag (NARDL) model is used to explore asymmetrical relations in the long-run. The pieces of evidence provided in this article show that an increase in the domestic interest rate has a more robust effect on the exchange rate compared to a decrease of the interest rate. The results further indicate that the impact of the domestic interest rate in the short-run is different from their long-run effects. The linear models which neglect asymmetric relation can yield misleading results by showing no relationship between the two variables in the long-run. This paper shows that there is a robust and stable but asymmetric relationship between the interest rate and exchange rate in the long-run.

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Effectiveness of high interest rate policy on exchange rates: A reexamination of the Asian financial crisis

Cited by 6 publications

References 17 publications

The Effects of Interest Rate on Real Effective Exchange Rate Volatility Spillover in Malaysia and Thailand: Empirical Evidence

The Effects of Interest Rate on Real Effective Exchange Rate Volatility Spillover in Malaysia and Thailand: Empirical Evidence

Macroeconomic Determinants of Interest Rate Volatility in Indonesia: A Structural VAR Analysis

Asymmetric relationship between interest rates and exchange rates: Evidence from Turkey

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