Monetary Policy and External Factors: Empirical Evidence for Association of Southeast Asian Nations 3
The motivation for this paper is the external factors can be the important objectives of the monetary policy in a small open economy. This study will extend the standard Taylor rule that initially encompassed output and inflation by adding the exchange rate and terms of trade. By using the augmente...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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EconJournals
2016-10-01
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| Series: | International Journal of Economics and Financial Issues |
| Online Access: | https://econjournals.com/index.php/ijefi/article/view/2989 |
| _version_ | 1797918223849488384 |
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| author | Pei-Tha Gan Nyuk-Ling Lee Mohd Yahya Mohd Hussin Norimah Rambeli |
| author_facet | Pei-Tha Gan Nyuk-Ling Lee Mohd Yahya Mohd Hussin Norimah Rambeli |
| author_sort | Pei-Tha Gan |
| collection | DOAJ |
| description |
The motivation for this paper is the external factors can be the important objectives of the monetary policy in a small open economy. This study will extend the standard Taylor rule that initially encompassed output and inflation by adding the exchange rate and terms of trade. By using the augmented Taylor rule, this paper examines exchange rates and terms of trade and determines its empirical validity based on a sample of ASEAN-3 countries. Using the technique of unrestricted error correction model, the findings provide some policy implications; the uncertain movements of the exchange rate and terms of trade can be fine-tuned by the central bank's interest rate instrument, and the inflation and output are useful policy indicators for monetary decision making of central bank, which eventually promotes the best economic outcomes.
Keywords Exchange rate, Monetary policy, Taylor rule, Terms of trade
JEL Classifications: C61, E58, E61, F41
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| first_indexed | 2024-04-10T13:25:55Z |
| format | Article |
| id | doaj.art-8e56f7b12c944772a9fd9f5d4c084945 |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T13:25:55Z |
| publishDate | 2016-10-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-8e56f7b12c944772a9fd9f5d4c0849452023-02-15T16:11:51ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382016-10-0164Monetary Policy and External Factors: Empirical Evidence for Association of Southeast Asian Nations 3Pei-Tha Gan0Nyuk-Ling LeeMohd Yahya Mohd HussinNorimah RambeliUniversiti Pendidikan Sultan Idris (Sultan Idris Education University) The motivation for this paper is the external factors can be the important objectives of the monetary policy in a small open economy. This study will extend the standard Taylor rule that initially encompassed output and inflation by adding the exchange rate and terms of trade. By using the augmented Taylor rule, this paper examines exchange rates and terms of trade and determines its empirical validity based on a sample of ASEAN-3 countries. Using the technique of unrestricted error correction model, the findings provide some policy implications; the uncertain movements of the exchange rate and terms of trade can be fine-tuned by the central bank's interest rate instrument, and the inflation and output are useful policy indicators for monetary decision making of central bank, which eventually promotes the best economic outcomes. Keywords Exchange rate, Monetary policy, Taylor rule, Terms of trade JEL Classifications: C61, E58, E61, F41 https://econjournals.com/index.php/ijefi/article/view/2989 |
| spellingShingle | Pei-Tha Gan Nyuk-Ling Lee Mohd Yahya Mohd Hussin Norimah Rambeli Monetary Policy and External Factors: Empirical Evidence for Association of Southeast Asian Nations 3 International Journal of Economics and Financial Issues |
| title | Monetary Policy and External Factors: Empirical Evidence for Association of Southeast Asian Nations 3 |
| title_full | Monetary Policy and External Factors: Empirical Evidence for Association of Southeast Asian Nations 3 |
| title_fullStr | Monetary Policy and External Factors: Empirical Evidence for Association of Southeast Asian Nations 3 |
| title_full_unstemmed | Monetary Policy and External Factors: Empirical Evidence for Association of Southeast Asian Nations 3 |
| title_short | Monetary Policy and External Factors: Empirical Evidence for Association of Southeast Asian Nations 3 |
| title_sort | monetary policy and external factors empirical evidence for association of southeast asian nations 3 |
| url | https://econjournals.com/index.php/ijefi/article/view/2989 |
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