Short-Run Determinants of the USD/MYR Exchange Rate

This paper examines short-run determinants of the U.S. dollar/Malaysian ringgit (USD/MYR) exchange rate based on a simultaneous-equation model. Applying the EGARCH model, the paper finds that the USD/MYR exchange rate is positively associated with the Malaysian real government Treasury bill rate, U.S. real GDP, the Malaysian real stock index and the expected exchange rate and is negatively influenced by the U.S. real Treasury bill rate, Malaysian real GDP and the U.S. real stock index. The Asian financial crisis has shifted the exchange rate function downward.