UPM Institutional Repository

Economic openness, exchange rate volatility, and the role of financial development


Habibi, Masoumeh (2015) Economic openness, exchange rate volatility, and the role of financial development. Masters thesis, Universiti Putra Malaysia.


This study employs a panel of 59 countries over the period 1980-2011, applying the Two-Step System GMM, to study the relationship between the trade-weighted real exchange rate volatility and openness of an economy, taking the role of financial development level into account. In order to capture the role of financial development level, interaction terms are introduced into the regression and thresholds of financial development are calculated above which, higher financial and trade openness have a stronger impact on real exchange rate volatility. The findings suggest that; (a) higher levels of trade openness as well as financial openness are associated with lower exchange rate volatility, (b) countries with higher levels of financial development experience a stronger negative effect of financial openness on real exchange rate volatility, (c) the effect of trade openness on exchange rate volatility is independent from the level of financial development.

Download File

FEP 2015 1IR.pdf

Download (1MB) | Preview

Additional Metadata

Item Type: Thesis (Masters)
Subject: Foreign exchange rates
Subject: Economic policy
Call Number: FEP 2015 1
Chairman Supervisor: Professor Azali Mohamed, PhD
Divisions: Faculty of Economics and Management
Depositing User: Haridan Mohd Jais
Date Deposited: 24 Jan 2018 04:50
Last Modified: 24 Jan 2018 04:50
URI: http://psasir.upm.edu.my/id/eprint/58477
Statistic Details: View Download Statistic

Actions (login required)

View Item View Item