2026-10-24T03:19:28Z https://meral.edu.mm/oai

oai:meral.edu.mm:recid/00009062 2024-05-27T03:54:52Z 1582963436320 1582963436320:1582965742757

The Relevancy of Exchange Rate Regime in Myanmar (Tin Moe Moe, 2023) Tin Moe Moe 4 i ABSTRACT The role of a country’s exchange rate regime plays a very important role in shaping a country’s economic situation. To evaluate the relevancy of exchange rate regime in Myanmar, this paper analyzes two issues. The first one is examining the exchange rate misalignment, and the second one is analyzing the exchange rate pass through to domestic prices. Both analyses use the data for the period spanning from 2013 through 2020. Firstly, when examining the exchange rate misalignment, this study estimates the equilibrium exchange rate by using Vector Error Correction Model (VECM) model with three independent variables: net foreign asset, government expenditure and credit to private sector, and dependent variable is nominal effective exchange rate. NEER was misaligned from the equilibrium exchange rate, with the total misalignment period around 51.9 % of the period during 2013-2020. The large misalignment was in 2017, 2018 and 2020, mainly caused by natural disasters and global pandemic. It means that the exchange rate system adopted during the study period has challenges to absorb the external shock. Secondly, the study estimates the exchange rate pass-through effect to domestic prices using Vector Autoregression Model (VAR) model with five independent variables: import price, inflation, currency in circulation, output gap and oil price, and dependent variable inflation. The result of the impulse response test does not show any ERPT effect in the first year after shock, but there is small effect of ERPT in the second year after shock and the average ERPT is 0.03, indicating that 3% of the change in exchange rate is transmitted into import price. In the second year, the average ERPT to consumer prices is 0.32, meaning that 32% of the exchange rate shock is transmitted to consumer prices. Therefore, the relevancy of managed floating exchange rate regime in Myanmar during 2013-2020 was neutral to be in line with the macroeconomic situation. However, the significant misalignments observed in 2015 and 2020 were predominantly caused by natural disasters and the global pandemic. This study suggests that accumulating foreign exchange reserve to intervene the market and sufficient strengthening financial market development for effective monetary policy transmission channel to stabilize the inflation rate, being consistent among the monetary and fiscal policies and exchange rate policy and sufficient financing to investors and ii traders to help improve trade facilitation are main policy agendas for Myanmar for the managed floating exchange rate regime (intermediate regime) more effective in its implementation. Like other open economies, it is also suggested for Myanmar to adopt more flexible exchange rate regime rather than fixed exchange rate regime in order to absorb external shocks. 2023-09-01 https://meral.edu.mm/records/9062