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Estimating monetary policy rules for Malaysia: an optimal monetary conditions index

Author

Listed:
  • Pei-Tha Gan

    (Universiti Pendidikan Sultan Idris)

  • Kian-Teng Kwek

    (University of Malaya)

Abstract

Based on the concept of the monetary conditions index (MCI) to underscore the important role of the interest rates parity, the paper attempts to estimate a model of optimal monetary policy for open emerging market economies. It is designed to shed a light of significance of the internal and external equilibrium and provide the basis for the analysis. The paper estimated the relative influence of interest rates and exchange rate on the output gap, the weights of real interest rates and real exchange rate, which are used to estimate the optimal monetary conditions index. The estimated weights are 1.6: 1, which can be used to specify operating target rule for monetary policy.

Suggested Citation

  • Pei-Tha Gan & Kian-Teng Kwek, 2007. "Estimating monetary policy rules for Malaysia: an optimal monetary conditions index," Economics Bulletin, AccessEcon, vol. 28(11), pages 1.
    • Handle: RePEc:ebl:ecbull:eb-07aa0024
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    Citations

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    Cited by:

    1. Ndiaye, Ndeye Djiba & Masih, Mansur, 2017. "Is inflation targeting the proper monetary policy regime in a dual banking system? new evidence from ARDL bounds test," MPRA Paper 79420, University Library of Munich, Germany.
    2. El Alaoui, Abdelkader O. & Jusoh, Hashim Bin & Yussof, Sheila Ainon & Hanifa, Mohamed Hisham, 2019. "Evaluation of monetary policy: Evidence of the role of money from Malaysia," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 119-128.

    More about this item

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance

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