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Counterfeit currency can have detrimental effects on the economy of a country. The effects include inflation, as well as black marketing and misfortunes to commerce and administrations. This study analyzed the genuine and confiscated counterfeit Malaysian RM100 banknotes using Video Spectral Comparator (VSC), chemical profiling using Attenuated Total Reflectance-Fourier Transform Infrared (ATR-FTIR) and pattern recognition techniques of Principal Component Analysis (PCA) and Partial Linear Square-Discriminant Analysis (PLS-DA). VSC analysis revealed substantial morphological variations in the confiscated counterfeit samples than that of the genuine banknotes, as well as the standards prescribed by the Bank Negara Malaysia. ATR-FTIR analysis further revealed marked differences in the spectra between the counterfeit and the genuine banknotes, particularly in the fingerprint region of 1800–650 cm−1. While the PCA and PLS-DA successfully discriminated the genuine and counterfeit banknotes, further analysis on the counterfeit samples alone failed to categorically discriminate them into separate groups. Therefore, the fact that the counterfeit banknotes may originate from the same common source cannot be overruled, consistent with the relatively small circulation of the Malaysian currency. The procedure of using the non-destructive ATR-FTIR in combination with chemometrics techniques utilized here may prove useful for unveiling the current trends, as well as developing prediction ability to investigate future encounters of counterfeited Malaysian banknotes. [ABSTRACT FROM AUTHOR]

This study examines behaviour of the Consumer Price Index (CPI)-based Real Exchange Rates (RERs) of the ringgit against the currencies of Malaysia's major trading partners. The empirical results, which are derived from newly developed tests advocated by Lee and Strazicich (LS, 2003) and Narayan and Popp (NP, 2010) that allow for two breaks in the series, provide conflicting results. We obtain weaker support for Purchasing Power Parity (PPP) using the Narayan and Popp (2010) test. By truncating the sampling period into two sub-periods, we find that PPP holds for majority of the Malaysia's bilateral exchange rate vis-à-vis its major trading partners during the pre-crisis period. The 1997 currency crisis, however, has weakened the evidence in favour of PPP hypothesis in the strict sense. [ABSTRACT FROM AUTHOR]

The predictive power of the monetary model for the Malaysian ringgit/US dollar (RM/USD) rate is analysed using quarterly data ending in 2006:Q3. We find compelling evidence of a long-run relationship between exchange rates and the economic fundamental determinant. Macroeconomic factors systematically affect the long-run movement of the RM/USD rate. Additionally, the RM/USD rate was overvalued by about 10% several quarters before the 1997 crisis; after the crisis, rates fluctuated close to the equilibrium value. The out-of-sample forecasts demonstrate that the monetary model outperforms the naive random walk model. The monetary and Purchasing Power Parity (PPP) models do well at the four to eight quarters horizon. [ABSTRACT FROM AUTHOR]

The paper investigates the extent to which the Ringgit exchange rate converges on its purchasing power parity level in the long run, using the cointegration and variance ratio tests. The results indicate that shifts in the real exchange rate are dominated by permanent stochastic shocks which prevent it from reverting to its PPP base level. Further analysis indicates that low frequency movements in the relative price of tradable goods and the external terms of trade cannot explain the long-run swing in the real exchange rate. [ABSTRACT FROM AUTHOR]