Business and Economic Horizons

  Previous Article | Back to Volume | Next Article
  Abstract | References | Citation | Download | Preview | Statistics
Volume 13
Issue 3
Online publication date 2017-09-15
Title Exchange rate volatility and financial performance of agriculture firms in Malaysia: An empirical analysis using GARCH, wavelet and system GMM
Author Md Reaz, Fauziah Mahat, Ahmed Mohamed Dahir, Mohammad Sahabuddin, Abu Saad Md Masnun A Mahi
The insurgence of exchange rate volatility over the years has gained the attention of not only scholars but also policy makers around the world. This paper investigates the influence of exchange rate volatility to the financial performance of agriculture firms in Malaysia. Authors use the system GMM dynamic panel techniques, wavelet coherence technique and GARCH (1, 1) for the period of 2001 and 2015. The findings show that the volatility of exchange rate of Malaysian Ringgit (RM) has a negative impact on the financial performance of agriculture firms in Malaysia. The ARME and AVA demonstrate a positive impact on the financial performance at 1% significance level for the full sample. The findings also reveal that financial performance, exchange rate, consumer price index, and interest rate comove while using the wavelet coherence. 
Aghion, P., Bacchetta, P., Ranciè Re, R., & Rogoff, K. (2009). Exchange rate volatility and productivity growth: The role of financial development. Journal of Monetary Economics, 56, 494-513.
Aftab, M., & Rehman, I. U. (2017). Exchange rate risk and the bilateral trade between Malaysia and Singapore. Studies in Economics and Finance, (just-accepted), 00-00.
Ahmed, W. M. A. (2017). The impact of foreign equity flows on market volatility during politically tranquil and turbulent times: The Egyptian experience. Research in International Business and Finance, 40, 61-77.
Aguiar-Conraria, L., Azevedo, N., & Soares, M. J. (2008). Using wavelets to decompose the time-frequency effects of monetary policy. Physica A: Statistical Mechanics and its Applications, 387, 2863-2878.
Aguiar-Conraria, L. & Soares, M.J. (2011). Oil and the macroeconomy: Using wavelets to analyze old issues. Empir Econ, 40(3), 645-655.

Al-Shboul, M., & Anwar, S. (2014). Foreign exchange rate exposure: Evidence from Canada. Review of Financial Economics, 23, 18-29.
Allen, D., & Gandiya, F. (2004). Assessing exchange rate hypotheses within Southern Africa.
Andries, A. M., Ihnatov, I., Praru, B., & Tiwari, A. K. (2015). The relationship between exchange rates and interest rates in a small open emerging economy: The case of Romania. Economic Modelling, (December 2016).
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies. 58(2), 277.
Bahmani-Oskooee, M., & Aftab, M. (2017). On the asymmetric effects of exchange rate volatility on trade flows: New evidence from US-Malaysia trade at the industry level. Economic Modelling, 63(63), 86-103.
Bahmani-Oskooee, M., Iqbal, J., & Khan, S. U. (2016). Impact of exchange rate volatility on the commodity trade between Pakistan and the US. Economic Change and Restructuring, 52, 1-27.
Ca' Zorzi, M., Muck, J., & Rubaszek, M. (2016). Real exchange rate forecasting and PPP: This Time the Random Walk Loses. Open Economies Review, 27(3), 585-609.
Capelle-Blancard, G., & Havrylchyk, O. (2016). The impact of the French securities transaction tax on market liquidity and volatility. International Review of Financial Analysis, 47(331), 166-178.
Caporale, G. M., Menla Ali, F., & Spagnolo, N. (2015). Exchange rate uncertainty and international portfolio flows: A multivariate GARCH-in-mean approach. Journal of International Money and Finance, 54(November 2014), 70-92.
Chen, S., & Chang, M.-J. (2015). Capital control and exchange rate volatility. North American Journal of Economics and Finance, 33, 167-177.
Chi, J., & Cheng, S. K. (2016). Do exchange rate volatility and income affect Australia's maritime export flows to Asia? Transport Policy, 47, 13-21.
Chi, J., & Keow, S. (2016). Do exchange rate volatility and income affect Australia' s maritime export fl ows to Asia ? Transport Policy, 47, 13-21.
EPU, E. P. U. (2016). The Malaysian economy in figures, 2012, 66.
Hall, S., Hondroyiannis, G., Swamy, P. A. V. B., Tavlas, G., & Ulan, M. (2010). Exchange-rate volatility and export performance: Do emerging market economies resemble industrial countries or other developing countries? Economic Modelling, 27(6), 1514-1521.
Hansen, L. P. (2007). Generalized method of moments estimation. University of Chicago, 1-14.
Huang, C.-H., & Yang, C.-Y. (2014). European exchange rate regimes and purchasing power parity: An empirical study on eleven eurozone countries ☆. International Review of Economics and Finance, 35, 100-109.
Huffman, S. P., Makar, S. D., & Beyer, S. B. (2010). A three-factor model investigation of foreign exchange-rate exposure. Global Finance Journal, 21, 1-12.
Hung Yip, W., & Nguyen, H. (2012). Exchange rate exposure and the use of foreign currency derivatives in the Australian resources sector. Journal of Multinational Financial Management, 22, 151-167.
Hutson, E., & Laing, E. (2014). Foreign exchange exposure and multinationality. Journal of Banking and Finance, 43(1), 97-113.
Karakaş, G., & Erdal, G. (2017). The effect of exchange rate volatility on Turkey's agricultural foreign trade. Turkish Journal of Agriculture-Food Science and Technology, 5(6), 668-675.
Khin, A. A., Thambiah, S., & Teng, K. L. L. (2017). Short-term and long-term price forecasting models for the future exchange of Malaysian natural rubber market. International Journal of Agricultural Resources, Governance and Ecology, 13(1), 21-42.
Krapl, A., & Salyer, R. (2017). The effects of fair value reporting on corporate foreign exchange exposures. Research in International Business and Finance, 39, 215-238.
Lahmiri, S. (2017). Modeling and predicting historical volatility in exchange rate markets. Physica A, 471, 387-395.
Lothian, J. R. (2016). Purchasing power parity and the behavior of prices and nominal exchange rates across exchange-rate regimes. Journal of International Money and Finance, 69, 5-21.
Neter, J., Kutner, M.H., Nachtsheim, C.J. and Wasserman, W. (1996) Applied Linear Statistical Models. 4th Edition, WCB McGraw-Hill, New York.
Ouyang, A. Y., Rajan, R. S., Li, J., Professor, V., & Kuan, L. (2016). Exchange rate regimes and real exchange rate volatility: Does inflation targeting help or hurt. Torrence, C., & Compo, G. P. 91998). A practical guide to wavelet analysis. Bull. Am. Meteorol. Soc., 79, 61-78.
Reus, L., & Mulvey, J. M. (2016). Dynamic allocations for currency futures under switching regimes signals. European Journal of Operational Research, 253, 85-93.
Sekkat, K., & Varoudakis, A. (2000). Exchange rate management and manufactured exports in Sub-Saharan Africa. Journal of Development Economics, 61(1), 237-253.
Slavtcheva, D. (2015). Financial development, exchange rate regimes and productivity growth: Theory and evidence. Journal of Macroeconomics, 44, 109-123.
Wong, H. T., & Lee, H. A. (2016). Exchange rate volatility and exports of Malaysian manufactured goods to China: An empirical analysis. International Journal of Business and Society, 17(1), 145-149.
Ye, M., Hutson, E., & Muckley, C. (2014). Exchange rate regimes and foreign exchange exposure: The case of emerging market firms. Emerging Markets Review, 21, 156-182.
Yoshino, N., Kaji, S., & Asonuma, T. (2016). Exchange rate regime switching in Malaysia and Singapore in response to China's move to a basket peg: A DSGE analysis. Journal of Asian Economics, 46, 17-37.
Keywords Exchange rate volatility, financial performance, Malaysian agriculture firms, dynamic panel system, GMM, GARCH, wavelet coherence technique
Pages 409-427
Download Full PDF Download
  Previous Article | Back to Volume | Next Article
Search in articles
Journal Published articles
BEH 607
Journal Hits
BEH 1387513
Journal Downloads
BEH 46232
Total users online -