Comparison of Exchange Rate Determinants in ASEAN-5 Countries
DOI:
https://doi.org/10.65886/ijde.v2i03.58Keywords:
Exchange Rate, Panel ARDL, Pooled Mean Group, Commodity Prices, Heterogeneity, ASEANAbstract
The exchange rate is a macroeconomic variable highly susceptible to external shocks, yet its determinants in ASEAN-5 have not been comprehensively analyzed during a multi-shock period encompassing the COVID-19 pandemic, Federal Reserve monetary tightening, and the Russia-Ukraine conflict simultaneously. This study aims to analyze the determinants of the bilateral nominal exchange rate against the US dollar in Indonesia, Malaysia, Thailand, Vietnam, and the Philippines over the period January 2020 to February 2026, using Panel ARDL with the Pooled Mean Group (PMG) estimator combined with individual country-level ARDL estimation. The results show significant heterogeneity in responses across countries. Gold prices emerge as the most dominant long-run determinant, yet with an asymmetric impact weakening the exchange rates of Indonesia and Thailand through capital flight to safe-haven assets, while strengthening the Malaysian ringgit and the Philippine peso. Oil prices weaken the exchange rates of Thailand and Vietnam as net oil importers, but are not significant in Malaysia, a net oil exporter. Inflation confirms the Purchasing Power Parity mechanism in Indonesia, whereas in the Philippines it instead strengthens the peso due to an aggressive interest rate response. Exports to China paradoxically weaken the exchange rates of Thailand and Vietnam due to the high import content within global value chains. All Error Correction Term coefficients are significantly negative, with adjustment speeds varying across countries, reflecting differences in monetary policy capacity and flexibility in the region. These findings confirm that ASEAN exchange rate stabilization requires an approach tailored to each country’s economic structure and monetary policy regime.
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