Mori Kogid

Exchange Rate Movement and Foreign Direct Investment in Asean Economies

The inflows of foreign direct investment (FDI) are important for a countrys economic development, but the world market for FDI has become more competitive. This paper empirically analyses the exchange rate movements and foreign direct investment (FDI) relationship using annual data on ASEAN economies, that is, Malaysia, the Philippines, Thailand, and Singapore. By employing ARDL bounds test approach, the empirical results show the existence of significant long-run cointegration between exchange rate and FDI for the case of Singapore, Malaysia, and the Philippines with all countries recording negative coefficient implying that the appreciation of Singapore dollar, Malaysian ringgit, and the Philippine peso has a positive impact on FDI inflows. Using the ECM based ARDL approach for causality test, both Singapore and the Philippines show long-run bidirectional causality between exchange rate and FDI whereas long-run unidirectional causality running from the exchange rate to FDI in Malaysia. Furthermore, this study also found that short-run unidirectional causality running from the exchange rate to FDI exists in Singapore.

Is economic growth sufficient for poverty alleviation? Empirical evidence from Malaysia

Malaysias success story has been highlighted by the remarkable social transformation and poverty reduction accompanying rapid economic growth. Some three decades ago, more than half of the population was poor, the number of illiterates was high, and the average person could only hope to live until the age of 48. The proportion of poor people is currently down to 5.6 percent, 90 percent of adults are literate, and life expectancy is up to 68 years. Although Malaysias population has increased from approximately 10 million in the 1960s to about 28 million in 2010, the number of poor people has dropped significantly during this period. This paper attempts to determine the empirical relationship and importance of growth for poverty reduction in Malaysia. The results show that growth explains much, but not all, about the evolution of poverty. Economic growth is necessary but not sufficient for poverty reduction, especially if the objective is rapid and sustained poverty reduction. This study proposes that if a policys objective is focused on poverty alleviation, poverty reduction as well as economic growth should be simultaneously taken into account as the final target.

A test of the present value model of stock prices under rational and adaptive expectations using Bursa Malaysia data from 1983 to 2003

The rational expectations model has been the central expectations hypothesis used by economists while the adaptive expectations hypothesis has been considered by many as inefficient because expectations cannot fully exploit all available information. The aim of this study is to determine which of these two expectations formation hypotheses best explains the behaviour of investors in the Malaysian stock market. We employ the Chow (1988) methodology in which the two expectations hypotheses are applied to the present value model of stock prices for Malaysian stock market data consisting of stock prices and dividends for 13 companies over 21 years. Our results provide strong statistical support for the adaptive expectations hypothesis. This finding is in line with the empirical findings of Chow and his collaborators.

Revisiting Exchange Rate Exposure: A Case Study of Malaysia and Singapore

This paper investigates the relationship of foreign exchange rate movements on national market returns in Malaysia and Singapore using multi-bilateral exchange rates Euro (EUR), Japanese Yen (JPY) and Chinese Renminbi (CNY). The contemporaneous, asymmetric and lagged exchange exposure framework is used to investigate the nature of these exchange rate movements towards national market returns. Our study results show that both Malaysia and Singapore market returns are exposed to those currencies. The relationship of JPY and CNY exchange rate movements towards national market returns is contemporaneous in both countries. Meanwhile, EUR has a contemporaneous effect on national market returns in Malaysia but a lagged 1-month relationship in Singapore. Only JPY exchange rate returns have significant asymmetric effects on national market returns in Singapore. Future research should be conducted at industry and firm levels for more countries to better understand the stylised exchange rate exposure for mitigation purposes. Choice of the market index should also be taken into consideration when investigating the exchange rate exposure at the country level.

Volatility Spillover and Dynamic Correlation of Exchange Rate in ASEAN-5

Studies on the dynamic relationship between financial markets are always relevant, especially in the area of risk management. This study attempts to investigate the dynamic relationship between foreign exchange rate markets in the ASEAN-5, focusing on the study of volatility spillovers and dynamic correlation between markets based on daily data beginning January 3, 1994 to June 18, 2012. The study period is also divided into three sub-periods, January 3, 1994 September 1, 1998, September 2, 1998 July 21, 2005, and July 22, 2005 Jun 18, 2012. The findings based on MGARCH-BEKK models show that most of the volatility spillovers from Malaysia are significant to Indonesia, Thailand, the Philippines and Singapore. However the dynamic relationship varies according to different time periods. In addition, the study also shows that the markets of Thailand, the Philippines, and particularly the Indonesian are more volatile. The estimation result from the dynamic conditional correlation based on MGARCH-DCC model showed that the correlation between the Malaysian and other markets are positive and high in certain periods especially during the Asian and global financial crises. On the other hand, correlation between Thailand and Singapore markets are positive and high even in non-crisis periods. The study also showed that the correlation between markets is on the increasing trend in the years after the global financial crisis.

Revisiting Uncovered Interest Rate Parity: An Empirical Testing Using Bounds Test Approach

This study attempts to provide empirical evidence on the Uncovered Interest Rate Parity (UIRP) theory with Malaysia taken as a case study. Though theoretically sound, the UIRP does not seem to hold well empirically. Using quarterly data spanned from the first quarter of 1998 to the third quarter of 2010, the empirical results revealed the violation of the UIRP theory. This indicates that there is a possibility of arbitrage opportunity between Malaysia and the studied markets (Japan, Singapore and United Kingdom) due to the violation of Efficient Market Hypothesis (EMH). The study also found the absence of the forward premium puzzle in any cases.