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Impact of foreign exchange administration rule on the nexus between country-specific FDI and Malaysian currency

In the aftermath of the US Presidential election on 8 November 2016, the Malaysian currency Ringgit (MYR) had witnessed unprecedented volatility in its value relative to the USD. As a policy response, Bank Negara Malaysia (BNM) implemented a Supplemental Foreign Exchange Administration (SFEA) Rule i...

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Main Authors: Lau, Wee-Yeap, Yip, Tien-Ming
Format: Article
Published: Univ Wollongong 2021
Subjects:
HB Economic Theory
Online Access:http://eprints.um.edu.my/34986/
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spelling my.um.eprints.349862022-05-23T03:14:01Z http://eprints.um.edu.my/34986/ Impact of foreign exchange administration rule on the nexus between country-specific FDI and Malaysian currency Lau, Wee-Yeap Yip, Tien-Ming HB Economic Theory In the aftermath of the US Presidential election on 8 November 2016, the Malaysian currency Ringgit (MYR) had witnessed unprecedented volatility in its value relative to the USD. As a policy response, Bank Negara Malaysia (BNM) implemented a Supplemental Foreign Exchange Administration (SFEA) Rule in December 2016. Exporters are required to convert 75 per cent of foreign currency proceeds from the exports of goods into MYR with a licensed onshore bank. This study evaluates the impact of the new SFEA Rule on the relationship between country-specific FDI and MYR. Based on the data of five major inward FDI countries from 2015 to 2018, our results show: Firstly, Japanese FDI strengthens MYR in post-SFEA Rule; Secondly, FDI from Singapore is found to exert downward pressure on MYR; Thirdly, FDI from China, the Netherlands and the US are insignificant in influencing the MYR; Finally, inward FDI from different countries responds differently to the Rule. Notably, the results obtained are robust to different measures of the exchange rate. On policy suggestion, the Foreign Exchange Rule should also target non-export oriented inward FDIs to achieve the policy target. The result also highlights the importance of export-oriented FDIs for the longrun benefit of the Malaysian economy. Univ Wollongong 2021 Article PeerReviewed Lau, Wee-Yeap and Yip, Tien-Ming (2021) Impact of foreign exchange administration rule on the nexus between country-specific FDI and Malaysian currency. Australasian Accounting Business And Finance Journal, 15 (4). pp. 135-152. ISSN 1834-2000, DOI https://doi.org/10.14453/aabfj.v15i4.8 <https://doi.org/10.14453/aabfj.v15i4.8>. 10.14453/aabfj.v15i4.8
institution Universiti Malaya
building UM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaya
content_source UM Research Repository
url_provider http://eprints.um.edu.my/
topic HB Economic Theory
spellingShingle HB Economic Theory
Lau, Wee-Yeap
Yip, Tien-Ming
Impact of foreign exchange administration rule on the nexus between country-specific FDI and Malaysian currency
description In the aftermath of the US Presidential election on 8 November 2016, the Malaysian currency Ringgit (MYR) had witnessed unprecedented volatility in its value relative to the USD. As a policy response, Bank Negara Malaysia (BNM) implemented a Supplemental Foreign Exchange Administration (SFEA) Rule in December 2016. Exporters are required to convert 75 per cent of foreign currency proceeds from the exports of goods into MYR with a licensed onshore bank. This study evaluates the impact of the new SFEA Rule on the relationship between country-specific FDI and MYR. Based on the data of five major inward FDI countries from 2015 to 2018, our results show: Firstly, Japanese FDI strengthens MYR in post-SFEA Rule; Secondly, FDI from Singapore is found to exert downward pressure on MYR; Thirdly, FDI from China, the Netherlands and the US are insignificant in influencing the MYR; Finally, inward FDI from different countries responds differently to the Rule. Notably, the results obtained are robust to different measures of the exchange rate. On policy suggestion, the Foreign Exchange Rule should also target non-export oriented inward FDIs to achieve the policy target. The result also highlights the importance of export-oriented FDIs for the longrun benefit of the Malaysian economy.
format Article
author Lau, Wee-Yeap
Yip, Tien-Ming
author_facet Lau, Wee-Yeap
Yip, Tien-Ming
author_sort Lau, Wee-Yeap
title Impact of foreign exchange administration rule on the nexus between country-specific FDI and Malaysian currency
title_short Impact of foreign exchange administration rule on the nexus between country-specific FDI and Malaysian currency
title_full Impact of foreign exchange administration rule on the nexus between country-specific FDI and Malaysian currency
title_fullStr Impact of foreign exchange administration rule on the nexus between country-specific FDI and Malaysian currency
title_full_unstemmed Impact of foreign exchange administration rule on the nexus between country-specific FDI and Malaysian currency
title_sort impact of foreign exchange administration rule on the nexus between country-specific fdi and malaysian currency
publisher Univ Wollongong
publishDate 2021
url http://eprints.um.edu.my/34986/
_version_ 1735409643655528448
score 13.211869

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