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Type :thesis
Subject :HC Economic History and Conditions
Main Author :Yee, Kok Jing
Title :Monetary policy in the presence of external economic uncertainty in selected developed and developing countries
Place of Production :Tanjong Malim
Publisher :Fakulti Pengurusan dan Ekonomi
Year of Publication :2021
Corporate Name :Universiti Pendidikan Sultan Idris
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Abstract : Universiti Pendidikan Sultan Idris
The general objective of this study is to examine the monetary policy reaction function with the presence of exchange rate and terms of trade (TOT) in an economic uncertainty. The specific objectives of this study are to examine the causal relationship between monetary policy and economic uncertainty variables; and to examine the cointegration relationship between monetary policy by including the external economic uncertainty variables without neglecting the output uncertainty and inflation uncertainty. The data of this study are collected on a quarterly basis from the year 1995 quarter one until the year 2018 quarter one based on a sample of 30 countries. This study employs the causality tests (i.e., Toda Yamamoto causality test and Granger causality test) and panel heterogeneous cointegration approach. The findings from the causality tests and panel heterogeneous cointegration approach shows that the economic uncertainty variables have a causal relationship with monetary policy, and there is a significant long-run and short-run relationship between monetary policy and economic uncertainty variables, respectively. Overall, this study shows that the monetary policymakers are able to optimise the functions of the external economic uncertainty variables in the monetary policy reaction function without ignoring the role of the output uncertainty and inflation uncertainty. The policy implications of this study are monetary policymakers are able to design an alternative economic policy; to combat the economic uncertainty via interest rate uncertainty; to mitigate the negative impact from economic uncertainty; and to design a better economic policy for open economies to achieve the monetary policy goals.


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