Assessing Monetary Policy Efficiency in the ASEAN-5 Countries
AbstractThis paper investigates whether or not monetary policy has been conducted efficiently in five selected ASEAN economies. It derives a utility-consistent social loss function, as a metric for welfare, to assess monetary policy efficiency in a small open economy model. An optimal monetary policy that minimises the social loss function is solved using information on structural parameters estimated for a model that represents each of the selected ASEAN-5 countries. The results are largely consistent with common wisdom in the literature, where policies based on credible commitment give the best welfare outcome. The paper further examines the welfare implications of the currently adopted simple monetary policy feedback rule for each of the sample economies. This exercise points out that there is room for improving the performance of monetary policy in each country, and it should be explored further. It also suggests the possibility that monetary authorities in the sample countries may be optimising over an objective function that di§er from the social welfare function derived in the paper.
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Bibliographic InfoPaper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 200902.
Length: 29 pages
Date of creation: Mar 2009
Date of revision: Mar 2009
ASEAN; monetary policy; optimal policy rules; social welfare function;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-22 (All new papers)
- NEP-CBA-2009-03-22 (Central Banking)
- NEP-MAC-2009-03-22 (Macroeconomics)
- NEP-MON-2009-03-22 (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.:
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