Monetary Policy, Commodity Prices and the MYR/USD Exchange Rate: Evidence from a Nonlinear ARDL Model

This study examines the effects of monetary policy rates and commodity prices on the MYR/USD exchange rate using monthly data from January 2015 to December 2025. The explanatory variables are the Malaysian Overnight Policy Rate, the United States effective federal funds rate, Brent crude oil prices, and gold prices. A nonlinear autoregressive distributed lag model is applied to assess whether positive and negative changes in these variables produce different exchange rate responses. The Akaike Information Criterion selects the NARDL (2,0,0,1,1) specification. The results indicate strong persistence in MYR/USD movements. Changes in Brent crude oil and gold prices produce significant short-run effects, while changes in the Malaysian Overnight Policy Rate and the United States federal funds rate are statistically insignificant. The Wald tests do not identify significant differences between the positive and negative effects of the explanatory variables. The bounds test also does not provide robust evidence of a stable long-run relationship. The findings suggest that short-run movements in international commodity prices are more closely associated with MYR/USD fluctuations than direct changes in Malaysian and United States policy rates.

MYR/USD exchange rate, monetary policy, Brent crude oil price, gold price, nonlinear autoregressive distributed lag model

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