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Monetary policy and inflation targeting in a small open economy

Author

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  • Antoni

    (Faculty of Economics, Universitas Bung Hatta)

Abstract

The danger of inflation has been the focus of many central banks. This paper analyzes the transmission mechanism of monetary policy and inflation targeting in Malaysia with a backward-looking aggregate supply and demand analysis. The manage floating regime applied in the country has an important role in achieving a stable exchange rate against its major trading partners. It also analyzes the policy of maintaining the soundness of interest rate to perceive inflation targeting to increase its economic growth. Using 1991-2004 data and a traditional structural econometric model, it shows that output gap is important in forecasting a domestic inflation rate by controlling the interest rate.

Suggested Citation

  • Antoni, 2012. "Monetary policy and inflation targeting in a small open economy," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 4(2), pages 187-198, April.
    • Handle: RePEc:uii:journl:v:2:y:2010:i:2:p:187-198
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    References listed on IDEAS

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    Cited by:

    1. Barakchian , Seyed Mahdi, 2012. "Implications of Cointegration for Forecasting: A Review and an Empirical Analysis," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 7(1), pages 87-118, October.
    2. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2013. "Inflation Targeting and Financial Stability: A Perspective from the Developing World," Working Papers Series 324, Central Bank of Brazil, Research Department.
    3. Pierre-Richard Agénor & Timothy P. Jackson & Luiz Pereira da Silva, 2020. "Foreign Exchange Intervention and Financial Stability," Working Papers 202027, University of Liverpool, Department of Economics.
    4. Esteban Gómez & Angélica Lizarazo & Juan Carlos Mendoza & Andrés Murcia, 2017. "Evaluating the Impact of Macroprudential Policies in Colombia's Credit Growth," Borradores de Economia 980, Banco de la Republica de Colombia.
    5. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    6. Ahmad, Yamin S. & Staveley-O’Carroll, Olena M., 2017. "Exploring international differences in inflation dynamics," Journal of International Money and Finance, Elsevier, vol. 79(C), pages 115-135.
    7. Gómez, Esteban & Murcia, Andrés & Lizarazo, Angélica & Mendoza, Juan Carlos, 2020. "Evaluating the impact of macroprudential policies on credit growth in Colombia," Journal of Financial Intermediation, Elsevier, vol. 42(C).
    8. Gabriela Bezerra De Medeiros & Marcelo Savino Portugal & Edilean Kleber Da Silva Bejarano Aragon, 2016. "Endogeneity And Nonlinearities In Central Bank Of Brazil’S Reaction Functions: An Inverse Quantile Regression Approach," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 061, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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    More about this item

    Keywords

    Inflation targeting; monetary economics; structural econometric model;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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