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A rolling regression analysis of international transmission of inflation in Malaysia

The paper assesses the transmission of foreign inflationary disturbances for Malaysia. Using quarterly data from 1971 to 2003, we form a four–variable vector error correction model (VECM) consisting of domestic prices, US prices, Ringgit exchange rate and relative interest rate. Apart from the full–...

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Main Author: Ibrahim, Mansor
Format: Article
Language:English
Published: Sage Publications 2009
Online Access:http://psasir.upm.edu.my/id/eprint/12853/1/A%20rolling%20regression%20analysis%20of%20international%20transmission%20of%20inflation%20in%20Malaysia.pdf
http://psasir.upm.edu.my/id/eprint/12853/
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spelling my.upm.eprints.128532015-09-29T03:26:42Z http://psasir.upm.edu.my/id/eprint/12853/ A rolling regression analysis of international transmission of inflation in Malaysia Ibrahim, Mansor The paper assesses the transmission of foreign inflationary disturbances for Malaysia. Using quarterly data from 1971 to 2003, we form a four–variable vector error correction model (VECM) consisting of domestic prices, US prices, Ringgit exchange rate and relative interest rate. Apart from the full–sample analysis, recursive and rolling regressions are adopted to examine potential changes in inflation transmission from the US to Malaysia. As a basis for inferences, we rely on the speed of adjustments estimates as well as the sig–nificance of lagged first–differenced terms of the VECM. The results unequivocally suggest significant spillover of US inflationary disturbances to Malaysia in the short run regardless of the estimation periods. However, the speed of adjustment estimates for domestic prices tend to decline or turn insignificant when recent observations are added. Our findings demonstrate that inflation transmission across nations ought not to be cast in the light of exchange rate regimes alone. Indeed, the degree of capital mobility may have played a more dominant role. Sage Publications 2009-02 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/12853/1/A%20rolling%20regression%20analysis%20of%20international%20transmission%20of%20inflation%20in%20Malaysia.pdf Ibrahim, Mansor (2009) A rolling regression analysis of international transmission of inflation in Malaysia. Margin: The Journal of Applied Economic Research, 3 (1). pp. 21-39. ISSN 0973-8010; ESSN: 0973-8029 10.1177/097380100800300102
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description The paper assesses the transmission of foreign inflationary disturbances for Malaysia. Using quarterly data from 1971 to 2003, we form a four–variable vector error correction model (VECM) consisting of domestic prices, US prices, Ringgit exchange rate and relative interest rate. Apart from the full–sample analysis, recursive and rolling regressions are adopted to examine potential changes in inflation transmission from the US to Malaysia. As a basis for inferences, we rely on the speed of adjustments estimates as well as the sig–nificance of lagged first–differenced terms of the VECM. The results unequivocally suggest significant spillover of US inflationary disturbances to Malaysia in the short run regardless of the estimation periods. However, the speed of adjustment estimates for domestic prices tend to decline or turn insignificant when recent observations are added. Our findings demonstrate that inflation transmission across nations ought not to be cast in the light of exchange rate regimes alone. Indeed, the degree of capital mobility may have played a more dominant role.
format Article
author Ibrahim, Mansor
spellingShingle Ibrahim, Mansor
A rolling regression analysis of international transmission of inflation in Malaysia
author_facet Ibrahim, Mansor
author_sort Ibrahim, Mansor
title A rolling regression analysis of international transmission of inflation in Malaysia
title_short A rolling regression analysis of international transmission of inflation in Malaysia
title_full A rolling regression analysis of international transmission of inflation in Malaysia
title_fullStr A rolling regression analysis of international transmission of inflation in Malaysia
title_full_unstemmed A rolling regression analysis of international transmission of inflation in Malaysia
title_sort rolling regression analysis of international transmission of inflation in malaysia
publisher Sage Publications
publishDate 2009
url http://psasir.upm.edu.my/id/eprint/12853/1/A%20rolling%20regression%20analysis%20of%20international%20transmission%20of%20inflation%20in%20Malaysia.pdf
http://psasir.upm.edu.my/id/eprint/12853/
_version_ 1643825154395996160
score 13.211869

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