Source: RePEc

ABSTRACT This paper investigates the relative strength of four monetary policy transmission channels (exchange rate, asset price, interest rate and credit) in Malaysia using a 12-variable open economy VAR model. By comparing the baseline impulse response with the constrained impulse response where a particular channel is being switched off, the interest rate channel is found to be the most important in influencing output and inflation in the horizon of about two years, and the credit channel beyond that. The asset price channel is also relevant in the shorter-horizon, more so than the exchange rate channel, particularly in influencing output. For inflation, the exchange rate channel is more relevant than the asset price channel.

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    ABSTRACT: Global economic reformation has caused various direct and indirect effects on Malaysia's economic and the most attracting effects can be described throughout the Malaysia's labor market is the unemployment scenario. In Malaysia, most of manufacturing sector has applied high-tech machinery in order to produce more products in a short period; and not depending on labor productivity. These causes job turnover in most of major economic sectors in Malaysia and become worse once the real exchange rate become unstable after Asian financial crises in 1997. The main purpose of this study is to analyze the shocks and integration between financial development stability and overall unemployment in Malaysia for entire period of 1980-2010 by applying unit root test (Augmented Dickey-Fuller, Phillip-Perron and Zivot-Andrew), Gregory-Hansen cointegration test, vector error-correction model (VECM); and causality test. The estimated results clearly show that there is a shocks effect in the middle of 1990s; and long-run cointegration effects appeared between Malaysia's monetary policy and unemployment scenario for Malaysia. This happens because of the 'turn-over effect' appeared in Malaysia's labor market, where the high-educated job seekers are competing with low-educated with experience labor force. Besides that, the numbers of labor used in the agriculture and manufacturing sectors in Malaysia also decline because of technological used in the production line and overflow of foreign labor. Although the findings of this study clearly shows a dynamic long-run connection with 21% of speed of adjustment between Malaysia's monetary policy and unemployment; but surprisingly the causality results does not indicates any causal relation between both variables. In conclusion, we clarify that the monetary policy is not connected with overall unemployment in Malaysia.
    International Journal of Emerging Sciences. 01/2012; 1(2):247-258.
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    ABSTRACT: This study examines the effects of monetary policy on firms’ balance sheet, with a particular focus on the effects upon the firms’ fixed-investment spending. It uses a dynamic panel system GMM estimation proposed by Blundell and Bond (1998). The focal point has given to the two main channels of monetary policy transmission mechanism such as interest rates and broad credit channel in transmitting to firm investment spending. By estimating the firms’ investment model using a dynamic neo-classical framework, the empirical results tend to support the relevance of interest rates and broad credit channel in transmitting to the firm balance sheet condition that is firm’s investment spending. The results also reveal that the effect of monetary policy channels to the firms’ investment are heterogeneous fashioned, which is the small firms who faced financial constraint are responded more due to monetary tightening as compared to the large firm (less constraint firms). Thus, the monetary authority has to concern the microeconomic aspects of the firm in formulation their monetary policy.
    University Library of Munich, Germany, MPRA Paper. 01/2010;
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    ABSTRACT: This paper addresses the end of the 1997 Asian financial crisis in Malaysia and South Korea and defines changes in monetary policy post-crisis. Using a backwards-looking Chow Forecasting test, end dates for the crisis were empirically determined in the two countries of interest. Time series were then constructed for the pre- and post-crisis time periods using the estimated recovery dates. Vector autoregression was run on the models and impulse responses constructed. Four monetary transmission channels, namely a foreign interest rate, the real exchange rate, a domestic interest rate, and the monetary aggregate, were studied. By looking at these transmission mechanisms pre- and post- crisis, changes in monetary policy were detected. The results suggest that while Malaysia's monetary policy experienced little alteration between the pre- and post-crisis eras, South Korea's policy was significantly affected. This disparity between Malaysia and South Korea's overall results is possibly a function of the exchange rate regimes. While Malaysia continued to support a fixed exchange rate after the crisis, South Korea abandoned its abandoned its peg. This indicates that a major factor in monetary policy pre- and post-crisis was the exchange rate regimes.


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