VARMA models for Malaysian Monetary Policy Analysis
This paper establishes vector autoregressive moving average (VARMA) models for Malaysian monetary policy analysis by efficiently identifying and simultaneously estimating the model parameters using full information maximum likelihood. The monetary literature is largely dominated by vector autoregressive (VAR) and structural vector autoregressive (SVAR).models, and to the best of our knowledge, this is the first paper to use VARMA modelling to investigate monetary policy. Malaysia is an interesting small open economy to study because of the capital control measures imposed by the government following the 1997 Asian financial crisis. A comparison of the impulse responses generated by these three models for the pre- and post-crisis periods indicates that the VARMA model impulse responses are consistent with prior expectations based on economic theories and policies pursued by the Malaysian government, particularly in the post-crisis period. Furthermore, uncovering the way in which various intermediate channels work would help Bank Negara Malaysia to steer the economy in the right direction so that monetary policy can still remain an effective policy measure in achieving sustainable economic growth and price stability.
|Date of creation:||Aug 2009|
|Date of revision:|
|Contact details of provider:|| Postal: PO Box 11E, Monash University, Victoria 3800, Australia|
Phone: +61 3 99052489
Fax: +61 3 99055474
Web page: http://business.monash.edu/econometrics-and-business-statistics
More information through EDIRC
|Order Information:|| Web: http://business.monash.edu/econometrics-and-business-statistics Email: |
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.:
- Athanasopoulos, George & Vahid, Farshid, 2008.
"VARMA versus VAR for Macroeconomic Forecasting,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 26, pages 237-252, April.
- George Athanasopoulos & Farshid Vahid, 2006. "VARMA versus VAR for Macroeconomic Forecasting," Monash Econometrics and Business Statistics Working Papers 4/06, Monash University, Department of Econometrics and Business Statistics.
- Ben S. Bernanke, 1986.
"Alternative Explanations of the Money-Income Correlation,"
NBER Working Papers
1842, National Bureau of Economic Research, Inc.
- Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Olivier J. Blanchard & Mark W. Watson, 1986.
"Are Business Cycles All Alike?,"
in: The American Business Cycle: Continuity and Change, pages 123-180
National Bureau of Economic Research, Inc.
- Maravall, Agustin, 1993. "Stochastic linear trends : Models and estimators," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 5-37, March.
- ZELLNER, Arnold & PALM, Franz, .
"Time series analysis and simultaneous equation econometric models,"
CORE Discussion Papers RP
173, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Zellner, Arnold & Palm, Franz, 1974. "Time series analysis and simultaneous equation econometric models," Journal of Econometrics, Elsevier, vol. 2(1), pages 17-54, May.
- Cushman, David O. & Zha, Tao, 1997.
"Identifying monetary policy in a small open economy under flexible exchange rates,"
Journal of Monetary Economics,
Elsevier, vol. 39(3), pages 433-448, August.
- David O. Cushman & Tao Zha, 1995. "Identifying monetary policy in a small open economy under flexible exchange rates," FRB Atlanta Working Paper 95-7, Federal Reserve Bank of Atlanta.
- Sukudhew Singh & Ahmad Razi & Norhana Endut & Helmi Ramlee, 2008. "Impact of financial market developments on the monetary transmission mechanism," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial market developments and their implications for monetary policy, volume 39, pages 49-99 Bank for International Settlements.
- Ben S. Bernanke & Ilian Mihov, 1998. "Measuring Monetary Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 869-902.
- Ramana Ramaswamy & Torsten SlÃ¸k, 1997. "The Real Effects of Monetary Policy in the European Union: What Are the Differences?," IMF Working Papers 97/160, International Monetary Fund.
- Robert J. Corker & Wanda Tseng, 1991. "Financial Liberalization, Money Demand, and Monetary Policy in Asian Countries," IMF Occasional Papers 84, International Monetary Fund.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2008.
"Are Structural VARs with Long-Run Restrictions Useful in Developing Business Cycle Theory?,"
NBER Working Papers
14430, National Bureau of Economic Research, Inc.
- Chari, V.V. & Kehoe, Patrick J. & McGrattan, Ellen R., 2008. "Are structural VARs with long-run restrictions useful in developing business cycle theory?," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1337-1352, November.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Are structural VARs with long-run restrictions useful in developing business cycle theory?," Staff Report 364, Federal Reserve Bank of Minneapolis.
- Robert Neil McCauley, 2006. "Understanding monetary policy in Malaysia and Thailand: objectives, instruments and independence," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 172-198 Bank for International Settlements.
- George Athanasopoulos & Farshid Vahid, 2008.
"A complete VARMA modelling methodology based on scalar components,"
Journal of Time Series Analysis,
Wiley Blackwell, vol. 29(3), pages 533-554, 05.
- George Athanasopoulos & Farshid Vahid, 2006. "A Complete VARMA Modelling Methodology Based on Scalar Components," Monash Econometrics and Business Statistics Working Papers 2/06, Monash University, Department of Econometrics and Business Statistics.
- Mansor H. Ibrahim, 2005. "Sectoral Effects of Monetary Policy: Evidence from Malaysia," Asian Economic Journal, East Asian Economic Association, vol. 19(1), pages 83-102, 03.
- Mehrotra, Aaron, 2005.
"Exchange and interest rate channels during a deflationary era - Evidence from Japan, Hong Kong and China,"
BOFIT Discussion Papers
17/2005, Bank of Finland, Institute for Economies in Transition.
- Mehrotra, Aaron N., 2007. "Exchange and interest rate channels during a deflationary era--Evidence from Japan, Hong Kong and China," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 188-210, March.
- 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.
- Domac, Ilker, 1999. "The distributional consequences of monetary policy : evidence from Malaysia," Policy Research Working Paper Series 2170, The World Bank.
- Umezaki, So, 2006. "Monetary and Exchange Rate Policy in Malaysia before the Asian Crisis," IDE Discussion Papers 79, Institute of Developing Economies, Japan External Trade Organization(JETRO).
- Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
- Wallis, Kenneth F, 1977. "Multiple Time Series Analysis and the Final Form of Econometric Models," Econometrica, Econometric Society, vol. 45(6), pages 1481-97, September.
- Kim, Soyoung & Roubini, Nouriel, 2000. "Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 561-586, June.
- Robert Dekle & Mahmood Pradhan, 1997. "Financial Liberalization and Money Demand in Asean Countries: Implications for Monetary Policy," IMF Working Papers 97/36, International Monetary Fund.
- Dungey, Mardi & Pagan, Adrian, 2000. "A Structural VAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 321-42, December.
- Cooley, Thomas F. & Dwyer, Mark, 1998. "Business cycle analysis without much theory A look at structural VARs," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 57-88.
When requesting a correction, please mention this item's handle: RePEc:msh:ebswps:2009-6. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr Xibin Zhang)
If references are entirely missing, you can add them using this form.