Real Exchange Rate and Terms of Trade: Some Empirical Evidence in Malaysia, Singapore and Thailand

  • Wong Hock Tsen School of Business and Economics Universiti Malaysia Sabah

Abstract

This study examined the relationship between real exchange rate and terms of trade in Malaysia, Singapore, and Thailand in two cases, namely a three-variable case and a four-variable case. The results of cointegration tests showed that there is long-run relationships among real exchange rate, terms of trade, and relative demand for Malaysia. Moreover, there is long-run relationship among real exchange rate, terms of trade, relative demand, and relative real interest rate for Malaysia and Thailand. The results of Granger causality showed that real exchange rate does not Granger cause terms of trade, however the result is mixed for Thailand. The contribution of terms of trade and relative demand to real exchange rate is mixed and small. Generally, the contribution of terms of trade to real exchange rate is greater than the contribution of relative demand in Singapore. For Thailand, relative demand is more important than terms of trade in the determination of real exchange rate. For Malaysia, the results are mixed.

 

Published
2020-05-01
How to Cite
TSEN, Wong Hock. Real Exchange Rate and Terms of Trade: Some Empirical Evidence in Malaysia, Singapore and Thailand. International Journal of Management Studies, [S.l.], v. 16, n. 1, p. 229-259, may 2020. ISSN 2180-2467. Available at: <http://e-journal.uum.edu.my/index.php/ijms/article/view/9965>. Date accessed: 06 july 2020.