Malaysia--China in the Liberalization Era: Structural Modelling of International Parity Conditions and Transmission Mechanism
We construct a structural system that jointly examines Purchasing Power and Interest Parity conditions for Malaysia--China during 1996Q1--2010Q4. Structural VARX, VECMX, over-identifying restrictions, bootstrapping and persistent profiles are utilized in the analyses. We find support for interaction between the goods and capital markets of Malaysia--China, when Asia crisis and sub-prime crisis are taken into accounts. The faster pace of adjustment towards price instead of interest equilibrium implies the non-appearance of sequencing problem in economic integration. Nevertheless, it is of concern that maintaining a rigid foreign exchange with major trading partner could be costly with potentially contagious price instability and financial risk.
Year of publication: |
2012
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Authors: | Chan, Tze-Haw ; Hooy, Chee-Wooi |
Published in: |
Global Economic Review. - Taylor & Francis Journals, ISSN 1226-508X. - Vol. 41.2012, 3, p. 259-277
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Publisher: |
Taylor & Francis Journals |
Saved in:
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