EXCHANGE RATES AND MACROECONOMIC DETERMINANTS OF ASEAN-5 COUNTRIES

Previous studies often provide evidence of the inadequacy of the monetary model of exchange rate. Numerous exchange rate researchers have advocated that omission of important variables may have led to such outcome. This study finds that standard monetary fundamentals together with stock prices differential and current accounts differential could establish stable relationship with exchange rates for majority of the ASEAN-5 countries. This finding suggests that besides the monetary variables, the differentials of stock prices or current accounts are crucial variables that cannot be neglected in the monitoring of exchange rate movements