Sources of Exchange Rate Fluctuations in Thailand

Siriwutiset, Trin (2006) Sources of Exchange Rate Fluctuations in Thailand. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

Exchange rate fluctuations play an important role in economic decision. The rise or falls in exchange rate are one of the most concerned issue in macroeconomics. This study aims to identify the sources of exchange rate fluctuations of the Thai Baht from various types of shocks between 1997:09 and 2002:08 by using VAR (Vector Autoregressive) model.

The past empirical studies such as Flood and Rose (1995) argue that the prevailing structural models fail to predict most of the fluctuation in exchange rates. Moreover, after financial and currency crises in 1990s, one attractive issue is that shocks can spread rapidly and viciously with in and/or outside the region of a crisis originating country. Consequently, this study examines the sources of exchange rate fluctuations by dividing them into 2 main groups. The first group is the factors from traditional models of exchange rate determination; the monetary approach. The effects from this group are called "fundamental effects". The second group is the factors from the theory of contagion transmissions. The effects from this group are called "contagion effects", which are difficult to control and measure. The fundamental-based contagion under the World Bank's broad definition of contagion is employed.

The VAR model shows that contagion effects have more contribution in explaining the Thai nominal exchange rate fluctuation than fundamental effects. Several policy implications can be made following the finding to compliment the importance of contagion effects.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 02 Aug 2007
Last Modified: 25 Oct 2016 06:01
URI: http://eprints.nottingham.ac.uk/id/eprint/20665

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