Relationship between changes in the budget deficit and the movement on the exchange rate in the ASEAN-5 countries: A panel data approach
Date of Publication
2008
Document Type
Bachelor's Thesis
Degree Name
Bachelor of Science in Applied Economics
Subject Categories
Economics
College
Ramon V. Del Rosario College of Business
Department/Unit
Economics
Defense Panel Member
Myrna Austria
Marvin Castell
Abstract/Summary
The currency value of a country is constantly being managed and evaluated by a pool of intellectual economic and financial experts simply because it carries with it much significance as it is being utilized as a basis for investments, capital lending, economic standing and potential trends. Thus, it is essential to assess its determinants in order for the tasked professionals to be equipped in manipulating the appropriate variables accordingly.
This study aims to determine if the indirect effects of the changes in the ASEAN-5 budget deficit are more dominant than its direct effect in influencing movements on their corresponding exchange rate. To attain the stated objective, the gathered data for the ASEAN-5, namely, Indonesia, Malaysia, Philippines, Singapore and Thailand were regressed upon the basis of a Seemingly Unrelated Regression model. The indirect effects were evaluated through changes brought about by the expected inflation, risk premium and expected rate of return effects as opposed to the straightforward aftermath of the budget deficit.
The results of this study indicated that the indicted that the indirect effects were actually more dominant in affecting the movement on the exchange rate of the ASEAN 5. Therefore, contrary to the conventional macroeconomic theory that states otherwise, an increase (decrease) in the budget will cause the exchange rate to depreciate (appreciate).
Abstract Format
html
Language
English
Format
Accession Number
TU16611
Shelf Location
Archives, The Learning Commons, 12F, Henry Sy Sr. Hall
Keywords
Foreign exchange rates; Budget deficits; Foreign exchange market.
Recommended Citation
Alaba, J. U., Perez, M. M., & Tan, L. T. (2008). Relationship between changes in the budget deficit and the movement on the exchange rate in the ASEAN-5 countries: A panel data approach. Retrieved from https://animorepository.dlsu.edu.ph/etd_bachelors/11452
