Foreign Shocks, Monetary Policy, and Macroeconomic Fluctuations in a Small Open Economy: A SVAR Study of Malaysia

Acta Universitatis Danubius: Oeconomica

卷:12

Zulkefly Abdul Karim¹  Bakri Abdul Karim² 

[1] Universiti Kebangsaan Malaysia;

[2] Universiti Malaysia Sarawak;

关键词: Monetary policy;    open-economy;    SVAR;   

DOI  :  

来源: DOAJ

【 摘 要 】

This paper investigates the effect of foreign shocks upon domestic macroeconomicfluctuations and monetary policy, and examines the effectiveness of domestic monetary policy as astabilization policy in Malaysia. Monetary policy variables (interest rate and money supply) havebeen measured through a non-recursive structural VAR (SVAR) identification scheme, which allowsthe monetary authority to set the interest rate and money supply after observing the current value offoreign variables, domestic output and inflation. The results show the important role of foreign shocksin influencing Malaysian monetary policy and macroeconomic variables. There is a real effect ofmonetary policy, that is, a positive shock in money supply increases domestic output. In contrast, apositive interest rates shock has a negative effect on domestic output growth and inflation. The effectsof money supply and interest rate shocks on the exchange rate and stock prices are also consistentwith standard economic theory. In addition, domestic monetary policy is able to mitigate the negativeeffect of external shocks upon domestic economy.

【 授权许可】

Unknown