Measuring Monetary Conditions in A Small Open Economy: The Case of Malaysia
AbstractThe paper explores the measurement of monetary condition in Malaysia to augment the existing monetary policy framework. As an open economy, Monetary Condition Index (MCI) and Financial Condition Index (FCI) are applicable to understand the monetary condition especially in the era of financial deregulation and liberalisation. The results obtained suggest that the index is most useful when the exchange market exhibits stable conditions, and would be a constructive tool in the simultaneous management of the foreign currency and domestic money markets. However, the frequent experience of instability caused by supply and demand shocks with persistent and large inertia in the economy complicates the practical use of MCI and FCI in Malaysia. While this approach obviously does not provide answers to every question and as a leading indicator for inflation, it nonetheless makes it possible to measure the monetary condition in the Malaysian economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 29154.
Date of creation: 01 Sep 2010
Date of revision:
Monetary condition index; Monetary Policy; Malaysia;
Other versions of this item:
- Muhamed Zulkhibri Abdul Majid, 2012. "Measuring monetary conditions in a small open economy: the case of Malaysia," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(3), pages 218-231, August.
- Abdul Majid, Muhamed Zulkhibri, 2010. "Measuring Monetary Conditions in A Small Open Economy: The Case of Malaysia," MPRA Paper 29041, University Library of Munich, Germany.
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-12 (All new papers)
- NEP-CBA-2011-03-12 (Central Banking)
- NEP-MAC-2011-03-12 (Macroeconomics)
- NEP-MON-2011-03-12 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Mayes & Matti Virén, 2000.
"The exchange rate and monetary conditions in the Euro area,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 136(2), pages 199-231, June.
- Mayes, David G. & Viren, Matti, 1998. "The Exchange Rate and Monetary Conditions in the Euro Area," Research Discussion Papers 27/1998, Bank of Finland.
- Eika, K.H. & Ericsson, N.R. & Nymoen, R., 1996.
"Hazards in Implementing a Monetary Conditions Index,"
32/1996, Oslo University, Department of Economics.
- Eika, Kari H & Ericsson, Neil R & Nymoen, Ragnar, 1996. "Hazards in Implementing a Monetary Conditions Index," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 765-90, November.
- Kari H. Eika & Neil R. Ericsson & Ragnar Nymoen, 1996. "Hazards in implementing a monetary conditions index," International Finance Discussion Papers 568, Board of Governors of the Federal Reserve System (U.S.).
- Caesar P Lack, 2003. "A financial conditions index for Switzerland," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 398-413 Bank for International Settlements.
- AfDB AfDB, . "AfDB Group Annual Report 2004," Annual Report, African Development Bank, number 60 edited by Koua Louis Kouakou.
- Ernst Fehr & Jean-Robert Tyran, 2000.
"Does Money Illusion Matter?,"
IEW - Working Papers
045, Institute for Empirical Research in Economics - University of Zurich.
- Charles Freedman, 1995. "The role of monetary conditions and the monetary conditions index in the conduct of policy [speech]," Bank of Canada Review, Bank of Canada, vol. 1995(Autumn), pages 53-59.
- Céline Gauthier & Christopher Graham & Ying Liu, 2004. "Financial Conditions Indexes for Canada," Working Papers 04-22, Bank of Canada.
- Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
- C. Goodhart, 2001. "What Weight Should be Given to Asset Prices in the Measurementof Inflation?," DNB Staff Reports (discontinued) 65, Netherlands Central Bank.
- Stéphanie Guichard & David Turner, 2008. "Quantifying the Effect of Financial Conditions on US Activity," OECD Economics Department Working Papers 635, OECD Publishing.
- Paulo Soares Esteves, 2003. "Monetary Conditions Index for Portugal," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
- Nicoletta Batini & Kenny Turnbull, 2000. "Monetary Conditions Indices for the UK: A Survey," Discussion Papers 01, Monetary Policy Committee Unit, Bank of England.
- Goodhart, Charles, 2001. "What Weight Should Be Given to Asset Prices in the Measurement of Inflation?," Economic Journal, Royal Economic Society, vol. 111(472), pages F335-56, June.
- Siklos, Pierre L, 2000. "Is the MCI a Useful Signal of Monetary Policy Conditions? An Empirical Investigation," International Finance, Wiley Blackwell, vol. 3(3), pages 413-37, November.
- Grégory Levieuge & Christophe Blot, 2008.
"Are MCIs Good Indicators of Economic Activity ? Evidence from the G7 Countries,"
Sciences Po publications
2008-07, Sciences Po.
- Christophe Blot & Grégory Levieuge, 2008. "Are MCIS good indicators of economic activity? Evidence from the G7 countries," Documents de Travail de l'OFCE 2008-07, Observatoire Francais des Conjonctures Economiques (OFCE).
- Peeters, Marga, 1999. "Measuring monetary conditions in Europe: Use and limitations of the monetary conditions index," MPRA Paper 23534, University Library of Munich, Germany.
- Andrew Swiston, 2008. "A U.S. Financial Conditions Index: Putting Credit Where Credit is Due," IMF Working Papers 08/161, International Monetary Fund.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.