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Jurnal Ekonomi Malaysia

57 (2) 2023 43 – 62

Effect of Monetary Policy Statement on Overnight Policy Rate

Department of Economics
Faculty of Business and Economics
Universiti Malaya
50603 Kuala Lumpur, MALAYSIA.

kianteck_ang@yahoo.com

Department of Economics
Faculty of Business and Economics
Universiti Malaya
50603 Kuala Lumpur, MALAYSIA.

tangtuckcheong@um.edu.my

Abstract

This study examines the causal effects of the key characteristics of Monetary Policy Statement (MPS) on the decision made for the overnight policy rate (OPR). It constructs the monetary data on hawkish and dovish sentiment from 106 MPS released by Bank Negara Malaysia (BNM) between May 2004 and November 2020, by using text mining method. Data were mined by identifying selected 12 hawkish and dovish words as well as the characteristics of MPS.  The findings showed that MPS content can be used to predict OPR decision. The study further found that while hawkishness is associated with a decision of increased OPR, dovishness is conversely related with a decision of decreased OPR. Accordingly, the study established that the day of the week when a particular MPS is released, together with Zeti’s leadership in May 2000 – April 2016 period, are factors associated with decisions to increase OPR. However, the number of days between two MPS statements are released is shown to be associated with OPR decrease. This study therefore suggests that MPS release appear predictive of BNM’s monetary conduct.

Keywords

Dovish; Hawkish; Malaysia; Monetary Policy Statement; Overnight policy rate; Sentiment data

JEL Codes

E52, E58
http://dx.doi.org/10.17576/JEM-2023-5702-04
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Teck Ang, K., & Cheong Tang, T. (2023). Effect of Monetary Policy Statement on Overnight Policy Rate. Jurnal Ekonomi Malaysia, 57(2), 43–62. http://dx.doi.org/10.17576/JEM-2023-5702-04

@article{teckang2023effect,
  title={Effect of Monetary Policy Statement on Overnight Policy Rate},
  author={Teck Ang, Kian and Cheong Tang, Tuck},
  journal={Jurnal Ekonomi Malaysia},
  volume={57},
  number={2},
  pages={43—62},
 

year={2023},
}

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