Jurnal Ekonomi Malaysia
48 (2) 2014 19 – 27
School of Economics
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 Bangi, Selangor D.E.
MALAYSIA
School of Economics
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 Bangi, Selangor D.E.
MALAYSIA
School of Economics
Faculty of Economics and Management
Universiti Kebangsaan Malaysia
43600 Bangi, Selangor D.E.
MALAYSIA
Abstract
This paper estimates a nonlinear model of monetary policy reaction function by augmenting the standard Taylor rule equation for the case of Malaysia. Monetary policy reaction function is identified by which the BNM sets the current level of policy rates after observing the current level of output, inflation and exchange rate, and lags of these variables (backward looking). Using quarterly time series data set spanning from 1991 to 2014, the findings support the relevance of Taylor rule in which the Bank Negara Malaysia (BNM) sets their policy rates based on both inflation and output growth. In addition, the BNM has also considered the exchange rate in their reaction function.
Keywords
Author’s Acknowledgement
This research was funded by a University Research Grant under Geran Galakan Penyelidik Muda (GGPM), Universiti Kebangsaan Malaysia (UKM). (Project code: GGPM-20B-005)
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Bibliography
@article{khalid2014testing,
title={Testing a Non-Linear Model of Monetary Policy Reaction Function: Evidence from Malaysia},
author={Khalid, Norlin and Abdul Karim, Zulkefly and Yussof, Izzuddin},
journal={Jurnal Ekonomi Malaysia},
volume={48},
number={2},
pages={19—27},
}
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