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Assessing the Effects of Monetary Policy Shocks in Malaysia: A Factor Augmented Vector Autoregressive Approach

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  • Soo Y Chua

Abstract

: This paper investigates the impact of monetary policy shocks on a wide range of macroeconomic variables in Malaysia. To achieve this, it uses the Factor Augmented Vector Autoregression (FAVAR) approach that combines factor analysis and vector autoregression. The information set consists of 78 monthly time series from 2000:3 to 2010:10. This approach is supposed to provide a more comprehensive and precise forecast of the economy. The results from the impulse response function show that the effect of the price puzzle is reduced with this approach. It is also found that financial and real variables react negatively to the monetary policy shocks in line with the economic theory.

Suggested Citation

  • Soo Y Chua, 2012. "Assessing the Effects of Monetary Policy Shocks in Malaysia: A Factor Augmented Vector Autoregressive Approach," The IUP Journal of Applied Economics, IUP Publications, vol. 0(3), pages 65-83, July.
    • Handle: RePEc:icf:icfjae:v:11:y:2012:i:3:p:65-83
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    Cited by:

    1. Elif ERER & Deniz ERER & Mustafa ÇAYIR & Nasuh Oğuzhan ALTAY, 2016. "TCMB, FED ve ECB Para Politikalarının Türkiye Ekonomisi Üzerindeki Etkileri: 1994-2014 Dönemi Analizi," Sosyoekonomi Journal, Sosyoekonomi Society, issue 24(29).
    2. Arikan, Cengiz & Yalcin, Yeliz, 2017. "Do The Countries’ Monetary Policies Have Spatial Impact?," MPRA Paper 83407, University Library of Munich, Germany.

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