The impact of exchange rate misalignment on portfolio inflows in Malaysia

Mohd Sidek, Noor Zahirah and Yusoff, Mohammed (2010) The impact of exchange rate misalignment on portfolio inflows in Malaysia. American Journal of Finance and Accounting, 2 (1). pp. 33-55. ISSN 1752-7775 (O), 1752-7767 (P)

PDF (Impact of exchange rate misalignment) - Published Version Restricted to Repository staff only Available under License Creative Commons Attribution Non-commercial. Download (645kB) | Request a copy

Abstract

The primary reason why exchange rate misalignment is of interest to economists lie with the notional premise that risks emanating from overvaluation may undermine the competitiveness of Malaysia as a destination for portfolio investment inflows. On the other hand, undervaluation should make her a more attractive host. This study presents an attempt to examine the impact of exchange rate misalignment on portfolio inflows in Malaysia. Results show that events of misalignment have a negative impact on portfolio inflows. Specifically, overvaluation has significant deterrent effect on portfolio inflows but the opposite could not be implied in the case of undervaluation. Therefore, exchange rate policies should be geared to keep the exchange rate in line with the economic fundamentals so as to avoid prolonged overvaluation.

Item Type:	Article (Journal)
Additional Information:	4178/3912
Uncontrolled Keywords:	equilibrium exchange rate, exchange rate misalignment, portfolio inflows
Subjects:	H Social Sciences > HG Finance > HG3810 Foreign exchange
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Economics and Management Sciences > Department of Economics
Depositing User:	Professor Mohammed Yusoff
Date Deposited:	23 Sep 2011 10:04
Last Modified:	14 Feb 2012 15:29
URI:	http://irep.iium.edu.my/id/eprint/3912

Actions (login required)

View Item