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The Relative Importance Of Monetary Policy Transmission Channels In Malaysia

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Hsiao Chink Tang ()
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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Paper provided by Australian National University, Centre for Applied Macroeconomic Analysis in its series CAMA Working Papers with number 2006-23.

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Length: 32 pages
Date of creation: Aug 2006
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Handle: RePEc:acb:camaaa:2006-23

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  6. Andrea Brischetto & Graham Voss, 1999. "A Structural Vector Autoregression Model of Monetary Policy in Australia," RBA Research Discussion Papers rdp1999-11, Reserve Bank of Australia. [Downloadable!]
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  15. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Gertler, Mark & Gilchrist, Simon, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 309-40, May. [Downloadable!] (restricted)
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  17. Azali, M & Matthews, K G P, 1999. "Money-Income and Credit-Income Relationships during the Pre- and the Post-liberalization Periods: Evidence from Malaysia," Applied Economics, Taylor and Francis Journals, vol. 31(10), pages 1161-70, October. [Downloadable!] (restricted)
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  20. Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  23. Domac, Ilker, 1999. "The distributional consequences of monetary policy : evidence from Malaysia," Policy Research Working Paper Series 2170, The World Bank. [Downloadable!]
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  1. Edda Claus & ris Claus, 2007. "Transmitting shocks to the economy: The contribution of interest and exchange rates and the credit channel," The Institute for International Integration Studies Discussion Paper Series iiisdp206, IIIS. [Downloadable!]
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