Beyond the Purchasing Power Parity: Exchange Rates, Prices and Interest Rates in ASEAN-5 Countries

717is study examines the association among price, exchange rates andinterest rates in ASEAN-5 economies. Several studies have suggested theimportance of the linkages between goods and assets market in thedetermination of exchange rates and one way 10 account for suchlinkages is to incorporate interest rate and prices. By using cointegrationtest, wefound evidence on the long run relationship among the variablesindicating the importance of interest rate and price on exchange ratewhen structural break is considered. The jindings thus show that thelinkages between goods and assets market found in developed countrieshas general applicability to other small open economies specifically forMalaysia only when structural break caused by thejinancial crisis 1997is considered Thedifferent in results/or the sub period indicate that notonly it is important to consider multivariate approach but also the impactoffinancial crisis in the future research examining exchange rate inASEAN-5 countries.