An Assessment of Malaysian Monetary Policy During the Global Financial Crisis of 2008-09 / Selim Elekdag, Subir Lall, Harun Alp.

Format:

Book

Government document

Author/Creator:

Elekdag, Selim.

Contributor:

Alp, Harun.

Lall, Subir.

International Monetary Fund. Asia and Pacific Department, issuing body.

Series:

IMF Working Papers; Working Paper ; No. 2012/035

IMF Working Papers

Language:

English

Subjects (All):

Monetary policy--Econometric models.

Monetary policy.

Global Financial Crisis, 2008-2009.

Monetary policy--Malaysia--Econometric models.

Physical Description:

1 online resource (24 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2012.

Language Note:

English

Summary:

Malaysia was hit hard by the global financial crisis of 2008-09. Anticipating the downturn that would follow the episode of extreme financial turbulence, Bank Negara Malaysia (BNM) let the exchange rate depreciate as capital flowed out, and preemptively cut the policy rate by 150 basis points. Against this backdrop, this paper tries to quantify how much deeper the recession would have been without the BNM's monetary policy response. Taking the most intense year of the crisis as our baseline (2008:Q4-2009:Q3), counterfactual simulations indicate that rather the actual outcome of a -2.9 percent contraction, growth would have been -3.4 percent if the BNM had not implemented countercyclical and discretionary interest rate cuts. Furthermore, had a fixed exchange rate regime been in place, simulations indicate that output would have contracted by -5.5 percent over the same four-quarter period. In other words, exchange rate flexibility and the interest rate cuts implemented by the BNM helped substantially soften the impact of the global financial crisis on the Malaysian economy. These counterfactual experiments are based on a structural model estimated using Malaysian data.

Contents:

Cover; Contents; I. Introduction; II. Background to the 2008-09 Crisis and its Impact; III. A Model for Malaysia's Monetary Policy; A. The Transmission of Shocks; B. What Role for Monetary Policy?; C. The Monetary Transmission Mechanism; IV. Estimation of the Model for Malaysia; A. Data; B. Model Parameters; V. The Role of Monetary Policy during the Crisis; A. Setting Up the Counterfactual Simulations; B. Results Based on the Counterfactual Simulations; C. How Do Our Results Compare with Those in the Literature?; VI. Summary and Main Policy Implications; Figures

1. Malaysia: Selected Macroeconomic Indicators2. Counterfactual Scenarios: The Role of Monetary Policy and Real GDP; Tables; 1. Calibrated Parameters; 2. Prior and Posterior Distributions; 3. The Role of Monetary Policy during the Global Financial Crisis 2008-09; 4. Summary of the Role of Monetary Policy; References

Notes:

Description based upon print version of record.

Includes bibliographical references.

Description based on online resource; title from PDF title page (ebrary, viewed June 15, 2014).

ISBN:

9781463939687

146393968X

9781463971175

1463971176