Exchange rate behaviour in ASEAN countries – a sensitivity analysis
Exchange rate behaviour in ASEAN countries – a sensitivity analysis

Summary/Abstract: Aim: The study examined the behavior of exchange rate in ASEAN countries. This was highlynecessitated in order to account for the structural break in the data set occasioned by global financialcrisis.Research method: The quantile regression sensitivity analysis was performed on daily series ofexchange rate volatility for 8 ASEAN countries having divided our sample into two, before and after thefinancial crisis eras. Periods of low market volatility (2001–2006 plus 2010–2017) and high marketvolatility (1990–2000, 2007–2009, plus 2018–2023) correlate to the periods before and after the financialcrisis, respectively.Findings: The empirical finding going forward is that since the global financial crisis took effect,exchange rate volatility has not been effectively curtailed by the governments and monetary authorizesof ASEAN countries especially in Thailand, Malaysia, Indonesia and Vietnam respectively. There istherefore the need for a policy fight in favour of stability of the currency exchange rates.Originality: The originality of the research resides with the sensitivity analysis which validates thepresence of high persistence in the volatility of the Thai Baht exchange rate throughout the quantiles.This was followed on by the high persistence in the exchange rate of the Malaysian ringgit which beganat the 70th quantile in the pre-financial crisis period with a persistence value of 1.0097 as against the30th quantile in the post-financial crisis estimations with a persistence value of 1.0387. The IndonesianRupiah and Vietnamese dong took turns as regards volatility persistence. We also found significantARCH effect which instigated further estimations of the GARCH and FIGARCH models as robustnesschecks.Contributions: With the GARCH results, the study contributed to establishing persistence of volatilityin the exchange rates of all ASEAN countries in our sample, with varying degrees and this could beattributed instabilities in the economies. Explicitly, the significance of the FIGARCH coefficientconfirms the persistence of volatility over time with considerable long-term memory effect. This impliesthat once the exchange rate becomes volatile, such volatility last long, influencing future volatility levelsnoticeably in all the countries. Exchange rate volatility persistence of the Singapore Dollar was very low.

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