Examining between Exchange Rate Volatility and Natural Rubber Prices: Engle-Granger Causality Test

Authors

  • Aye Aye Khin ​Assistant Professor, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.
  • Wong Hong Chau Assistant Professor, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.
  • Ung Leng Yean Senior Lecturer, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.
  • Ooi Chee Keong Assistant Professor, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.
  • Raymond Ling Leh Bin Lecturer, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.

Abstract

There are two objectives of this study, first, it is to determine the impact of exchange rate volatility on Malaysian natural rubber (NR) prices of (SMR20 and RSS4); second, it is to forecast a short-term exchange rate (ERP) of Malaysian Ringgit (RM per USD) and NR prices strongly represented in the Malaysian NR market. The granger causality test is first analyzed using the vector error correction model (VECM) with the more efficient Engle-Granger causality procedure. Both short-term ERP and NR prices ex-ante forecasts are tested using Pindyck and Rubinfeld's procedures. The result shows the RSS4 NR price Granger-causes the SMR20 NR price and also ERP with unidirectional causality relationship. Both ERP and NR prices forecasts would be on a slightly increasing trend from January to June 2016. It was due to government and traders changing their behaviour by increasing domestic consumptions for the stabilization of the NR supply-demand balance.

Keywords: Exchange Rate Volatility, Forecasting, Malaysian Natural Rubber Price

JEL Classifications: C1, C2, D4, F31, F37

Downloads

Download data is not yet available.

Author Biographies

Aye Aye Khin, ​Assistant Professor, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.

Assistant Professor,Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Malaysia

Wong Hong Chau, Assistant Professor, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.

Assistant Professor,Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Malaysia

Ung Leng Yean, Senior Lecturer, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.

Senior Lecturer,Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Malaysia

Ooi Chee Keong, Assistant Professor, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.

Assistant Professor,Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Malaysia

Raymond Ling Leh Bin, Lecturer, Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Lot PT21144, Jalan Sungai Long, Bandar Sungai Long Cheras, 43000 Kajang, Malaysia.

Lecturer,Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Malaysia

Downloads

Published

2017-12-09

How to Cite

Khin, A. A., Chau, W. H., Yean, U. L., Keong, O. C., & Leh Bin, R. L. (2017). Examining between Exchange Rate Volatility and Natural Rubber Prices: Engle-Granger Causality Test. International Journal of Economics and Financial Issues, 7(6), 33–40. Retrieved from http://econjournals.com/index.php/ijefi/article/view/5572

Issue

Section

Articles