The Asymmetric Effect of Currency Devaluation on Inflation in Malaysia; Evidence from Non-Linear ARDL
Ahmed Balarabe Musa1, Ibrahim Abdulhamid Danlami2, Sunday Elijah3
1Ahmed Balarabe Musa, Department of General Studies, School of Liberal Studies, Nuhu Bamalli Polytechnic, Zaria, Kaduna State, Nigeria, Economics, Faculty of Economics and Management, Universiti Putra Malaysia, UPM Serdang, Selangor, Malaysia.
2Ibrahim Abdulhamid Danlami, Department of Social Sciences and Administration, School of Continuing Education, Bayero University, Kano, Kano State, Nigeria, Economics, School of Economics, Finance and Banking, Universiti Utara Malaysia.
3Sunday Elijah, Department of Economics, Faculty of Management and Social Sciences, Federal University Gusau, Zamfara State, Nigeria Economics, Faculty of Economics and Management, Universiti Putra Malaysia, UPM Serdang, Selangor, Malaysia.
Manuscript received on 27 June 2019 | Revised Manuscript received on 10 July 2019 | Manuscript Published on 17 July 2019 | PP: 455-460 | Volume-8 Issue-2S July 2019 | Retrieval Number: B10670782S19/2019©BEIESP
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© The Authors. Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Abstract: This research is intended to investigate the effects of currency devaluation on inflation and the existence of asymmetry on such effect, in Malaysia. Given the nature of the research’s variables features (mixed stationary) and the objective of the study, the research employs non-linear autoregressive distributed lag (NARDL) model as the econometrics techniques of the study. The results show that currency devaluations are inflationary in the short run and also in the long run. Meanwhile, currency revaluations have no significant effect on inflation in the two periods. The implication of the findings is that; changes in the exchange rate, are flexible upward, but they are resistant to downward pressures. The research recommends implementations of policies that can trim down the demand for foreign exchange to reduce currency devaluation pressures.
Keywords: Asymmetry, Currency Devaluation, Inflation, Malaysia, NARDL.
Scope of the Article: Social Sciences