Monetary policy in the presence of external economic uncertainty in selected developed and developing countries
<p>The general objective of this study is to examine the monetary policy reaction function</p><p>with the presence of exchange rate and terms of trade (TOT) in an economic uncertainty.</p><p>The specific objectives of this study a...
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| Format: | thesis |
| Language: | eng |
| Published: |
2021
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| Subjects: | |
| Online Access: | https://ir.upsi.edu.my/detailsg.php?det=7332 |
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| Summary: | <p>The general objective of this study is to examine the monetary policy reaction function</p><p>with the presence of exchange rate and terms of trade (TOT) in an economic uncertainty.</p><p>The specific objectives of this study are to examine the causal relationship between</p><p>monetary policy and economic uncertainty variables; and to examine the cointegration</p><p>relationship between monetary policy by including the external economic uncertainty</p><p>variables without neglecting the output uncertainty and inflation uncertainty. The data</p><p>of this study are collected on a quarterly basis from the year 1995 quarter one until the</p><p>year 2018 quarter one based on a sample of 30 countries. This study employs the</p><p>causality tests (i.e., Toda Yamamoto causality test and Granger causality test) and panel</p><p>heterogeneous cointegration approach. The findings from the causality tests and panel</p><p>heterogeneous cointegration approach shows that the economic uncertainty variables</p><p>have a causal relationship with monetary policy, and there is a significant long-run and</p><p>short-run relationship between monetary policy and economic uncertainty variables,</p><p>respectively. Overall, this study shows that the monetary policymakers are able to</p><p>optimise the functions of the external economic uncertainty variables in the monetary</p><p>policy reaction function without ignoring the role of the output uncertainty and inflation</p><p>uncertainty. The policy implications of this study are monetary policymakers are able</p><p>to design an alternative economic policy; to combat the economic uncertainty via</p><p>interest rate uncertainty; to mitigate the negative impact from economic uncertainty;</p><p>and to design a better economic policy for open economies to achieve the monetary</p><p>policy goals.</p> |
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