Ere Outbreak in Malaysia: Macroeconomic Factors and Variability in Exchange Rates

Abstract

Purpose – To examine the impact of macroeconomic factors on exchange rate fluctuations in Malaysia during the quarter before the onset of the COVID-19 pandemic in early 2020. Design/methodology/approach – Data used in this study was collected on a quarterly basis, spanning from January 2009 to December 2019, and comprising 44 observations. The dependent variable of the study was the exchange rate, while the explanatory variables were the employment rate, balance of payments, budget deficit, tax rate, and corruption rate. Predictions were made using the Ordinary Least Squares (OLS) method. Findings – The findings revealed that only two variables, the tax rate and budget deficit, had a negative relationship with the exchange rate. The link between the exchange rate and other variables, such as the budget deficit, employment rate, and corruption rate, was found to be weak. Originality/value – This research makes a valuable contribution to the existing literature on the connection between exchange rates and macroeconomic factors in Malaysia. Furthermore, this study provides relevant insights for investors and business owners during their decision-making process.