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Structural VAR models for Malaysian monetary policy analysis during the pre- and post- 1997 Asian crisis periods
journal contribution
posted on 2023-05-17, 14:11 authored by Mala RaghavanMala Raghavan, Silvapulle, P, Athanasopoulos, GThis article conducts an in-depth investigation into building a Structural Vector Autoregression (SVAR) model and analysing the Malaysian monetary policy. Considerable attention is paid to: (i) the selection of foreign, policy and target variables; (ii) establish identifying restrictions and improve the estimates of impulse response functions; (iii) assess the importance of intermediate channels in transmitting monetary policy mechanism; and (iv) the way in which the 1997 Asian financial crisis affected the working of monetary policy. Malaysia is an interesting small open economy to study because, following this crisis, the government imposed capital and exchange rate control measures. The overall results suggest that the crisis and the subsequent major shift in the exchange rate regime have significantly affected the Malaysian ‘Black Box’. In the precrisis period, domestic variables appear to be more vulnerable to foreign monetary shocks. Further, the exchange rate played a significant role in transmitting the interest rate shocks, whereas credit and asset prices helped to propagate the money shock. In the post-crisis period however, asset prices play a more domineering role in intensifying the effects of both interest rate and money shocks on output, and the economy was insulated from foreign shocks.
History
Publication title
Applied EconomicsVolume
44Issue
29Pagination
3841-3856ISSN
0003-6846Department/School
TSBEPublisher
Routledge Taylor & Francis LtdPlace of publication
4 Park Square, Milton Park, Abingdon, England, Oxfordshire, Ox14 4RnRights statement
Copyright 2012 Taylor & FrancisRepository Status
- Restricted