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Revisiting Thailand's Monetary Policy Model for an Integrated Policy Analysis

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  • Pongpitch Amatyakul
  • Tosapol Apaitan
  • Savaphol Hiruntiaranakul
  • Nuwat Nookhwun

Abstract

The constraints facing conventional monetary policy during the recent COVID-19 pandemic accelerate the central banks' use of integrated policy, using multiple tools to fulfill their macroeconomic objectives. This paper, therefore, aims to improve Thailand's monetary policy model for conducting policy analyses involving multiple tools. We embed macro-financial linkages into our model, which facilitate the identification of various policy tools at the central bank's disposal. The model also features multiple sources of nonlinearity, including an effective lower bound (ELB) constraint, to better capture economic dynamics during crises. We allow for a joint calibration of several tools, including conventional interest rate policy, foreign exchange (FX) intervention, macroprudential regulations and financial measures. Last, given a greater emphasis on financial stability, we attempt to measure macro-financial tail risks, which permit an analysis of policy trade-offs in addressing risks to financial stability. We show three applications of our model to shed light on potential gains from policy complementarity during the aftermath of COVID-19 pandemic: first, assessing the role of financial measures and FX intervention in supporting economic recovery; second, evaluating the interactions of monetary and macroprudential policies in maintaining financial stability; third, showing roles of fiscal policy as the ELB constraint binds.

Suggested Citation

  • Pongpitch Amatyakul & Tosapol Apaitan & Savaphol Hiruntiaranakul & Nuwat Nookhwun, 2021. "Revisiting Thailand's Monetary Policy Model for an Integrated Policy Analysis," PIER Discussion Papers 164, Puey Ungphakorn Institute for Economic Research.
    • Handle: RePEc:pui:dpaper:164
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    References listed on IDEAS

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    Cited by:

    1. Luangaram, Pongsak & Wongpunya, Nipit, 2024. "The effect of trade openness and exchange rate on inflation targeting in Thailand," Journal of Asian Economics, Elsevier, vol. 92(C).

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    More about this item

    Keywords

    Monetary policy; Integrated policy framework; Semi-structural model; Financial stability;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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