• KDI Journal of Economic Policy
• /
• 제42권4호
• /
• pp.59-90
• /
• 2020

U.S. monetary policy has been claimed to generate global spillover and to destabilize other small open economies. We analyze the effects of certain identified U.S. monetary shocks on gross capital flows in the Korean economy using the local projection method. Consistent with previous results on other small open economies, we initially confirm that U.S. interest rate hikes are dynamically correlated with foreign outflows and residents' inflows. That is, not only are they correlated with withdrawals by foreigners but they are also correlated with those by domestic (Korean) investors. The results are mostly driven by portfolio flows. Second, however, the marginal response to a U.S. monetary policy shock is, on average, subdued if we focus on the sample periods after the Global financial crisis of 2007-2008 (henceforth, global financial crisis). We conjecture a possible reason behind the change, an institutional change related to financial friction. If the degree of pledgeability of the value of net worth increases, the marginal responses by both investors would drop with a U.S. monetary policy shock, consistent with our findings.

• The Journal of Asian Finance, Economics and Business
• /
• 제7권11호
• /
• pp.23-31
• /
• 2020

This paper investigates the impact of monetary policy independence shock on bond yield by allowing for heterogeneous coefficients in the model based on panel data for 19 developing countries using quarterly data from 1991 to 2016. First, we estimate the model using conventional panel VAR estimation with the assumption of homogeneous coefficients across countries. Second, by performing Chow and Roy-Zellner tests to check the homogeneity assumption, we find that the assumption does not hold in the model. Third, we apply a mean-group estimation for panel VAR as a solution for heterogeneity panel model. The results reveal that central bank independence is effective in reducing bond yield with the maximum at period 6 after the shock. Shock one standard deviation bond yield has a negative effect on consumption and investment. We determine that central bank independence has a contradictory effect on real activity; a negative effect on consumption but a positive influence on investment for the first two years after the shock. Additionally, we split our sample into three groups to make the subgroups pool. Our empirical result shows that monetary policy independence shock reduces bond yield. Meanwhile, the response of economic activity to bond yield varies for all three groups.

• 동아시아경상학회지
• /
• 제1권1호
• /
• pp.8-16
• /
• 2013

Purpose: The objective of this paper is to identify and assess the contribution of budgetary, monetary and institutional shocks affecting the Tunisian economy over the period 1976-2003. The methodology used is vector autoregressive models and structural recent techniques for the analysis of time series related. The empirical results show a significant relationship between the supply shock and institutions on the one hand, and between institutional shocks and economic activity on the other hand. Research Design, Data and Methodology: As part of this section we will try to identify and assess the contribution of various shocks to macroeconomic variables' fluctuations for the Tunisian economy. The study period is: 1976-2003 and observations are annual. Results: The real business cycle theory argues that fluctuations in aggregate economic activity are the result of the interaction of the only real factors namely agents' preferences, technological opportunities, factor endowments and possibly certain institutional constraints. Conclusions: The lowest contribution to the variability of these rights is the monetary shock. As for "civil liberties", the largest share of their variability is the shock relating to the "political rights" during the first four periods .

• East Asian Economic Review
• /
• 제22권3호
• /
• pp.337-370
• /
• 2018

This paper discusses the design of monetary policy in a New Keynesian small open economy framework by introducing nominal wage rigidities and incomplete exchange rate pass-through on import prices. Three main findings are summarized. First, with the existence of an incomplete exchange rate pass-through and nominal wage rigidities, the optimal policy is to seek to minimize the output gap, the variance of domestic price and wage inflation, as well as deviations from the law of one price. Second, the CPI inflation targeting Taylor rule is welfare enhancing when there is a technological shock to the economy. The exception occurs when there is a foreign income shock, which minimizes welfare losses under the domestic inflation targeting Taylor rule. Last, two stylized Taylor rules turn out to be a bad approximation, but the modified Taylor rules that respond to the unemployment gap rather than the output gap are a closer approximation to the optimal policy.

• The Journal of Asian Finance, Economics and Business
• /
• 제9권9호
• /
• pp.263-269
• /
• 2022

The global financial crisis of 2008-2009 and the COVID-19 pandemic that started in 2019 along with the slow and unstable recovery of the global economy have raised concerns about the impact of global uncertainty on the macroeconomics of the countries. The paper used the Structural Vector Autoregression (SVAR) model to examine the impact of global uncertainty shocks on Vietnam's economy from the period 2008-2022. We found that Vietnam's output dropped following the shock of global uncertainty, the peak was in the third month, and lasted for one year. Inflation in Vietnam had a rapid downturn in the first month, peaked in the seventh month, and took a long time to cease. When the economy experienced the shock of increased global uncertainty, Vietnam's policy interest rate was adjusted downward. Additionally, we included a long-term interest rate to consider the overall impact of monetary policy into account. A decreasing trend was also found with this rate. The global uncertainty shock effects acted as the aggregate demand shocks, reducing output and inflation as the uncertainty increases and vice versa, thus monetary policy can be used to regulate Vietnam's economy to deal with negative shocks without the trade-offs between output and inflation as aggregate supply shocks.

• East Asian Economic Review
• /
• 제23권4호
• /
• pp.409-427
• /
• 2019

This paper sets up a new Keynesian model with external habit to explore the role of each shock over business cycles in Korea. The estimated model via maximum likelihood shows that the productivity shock plays a pivotal role in explaining the output variations before and after the financial crisis since mid-1970s. It also shows that the model with external habit is more successful in explaining the business cycles in Korea after the Asian financial crisis than the model without habit. The monetary policy shock which dominates by accounting for more than 70 percent of the unconditional variance of the inflation rate before the financial crisis is less important in the inflation rate fluctuations after the financial crisis. This partly reflects the regime change of the monetary policy to the inflation targeting rule after the financial crisis.

• The Journal of Asian Finance, Economics and Business
• /
• 제6권3호
• /
• pp.103-113
• /
• 2019

The effectiveness of monetary policy critically depends upon how well the transmission mechanism functions, so that the desired impact on output and inflation is achieved. The purpose of this paper is to study the transmission mechanism of monetary policy by analyzing the impact on inflation and output during multiple indicator regime (1998-99 to 2014) in an emerging economy-India. The Inflation Targeting Regime is also briefly outlined alongwith the impact on output and inflation. Using quarterly data for the period 1997 to 2017, the paper uses weighted average call money market rate as a proxy for the policy rate and evaluates the strength of the interest rate channel. We use a conventional Structural vector auto regression (SVAR) methodology to evaluate the efficacy and show the impluse response functions. Our results find that changes in the policy rate impact output growth steeply with a lag of about two quarters and the impact on inflation is maximized after three quarters. The study concludes that the monetary policy in India has a significant impact on output and inflation in the short-to-medium-run. After the policy shock, the fall in the output growth rate is of greater magnitude than the fall in inflation.

• The Journal of Asian Finance, Economics and Business
• /
• 제9권1호
• /
• pp.153-166
• /
• 2022

The study estimates the Structured VAR and the Dynamic Stochastic General Equilibrium Model for the Vietnamese economy based on the new Keynesian model for small and open economies, with the output gap, inflation, policy interest rate, the Vietnamese exchange rate, and the inflation and interest rate in the United States. The paper aims to clarify the impulse response of the macro variables through their shocks. It offers to model the SVAR and DSGE processes, as well as describe why and how interest rate policy is important in the impulse response of macro variables like the output gap and inflation process. The study supports the central role of monetary policy by giving empirical evidence for the new Keynesian theory, according to which an interest rate shock causes the output gap to widen and inflation to decrease. Finally, the application of the DSGE model is becoming more and more popular in the State Bank of Viet Nam to improve its policy planning, analyzing, and forecasting policy towards sustainable and stable growth.

• 유통과학연구
• /
• 제11권10호
• /
• pp.73-79
• /
• 2013

Purpose - This study examines the impact of oil price volatility on economic activities in Korea. The new millennium has seen a deregulation in the crude oil market, which invited immense capital inflow into Korea. It has also raised oil price levels and volatility. Drawing on the recent theoretical literature that emphasizes the role of volatility, this paper attends to the asymmetric changes in economic growth in response to the oil price movement. This study further examines several key macroeconomic variables, such as interest rate, production, and inflation. We come to the conclusion that oil price volatility can, in some part, explain the structural changes. Research design, data, and methodology - We use two methodological frameworks in this study. First, in regards to the oil price uncertainty, we use an Exponential-GARCH (Exponential Generalized Autoregressive Conditional Heteroskedasticity: EGARCH) model estimate to elucidate the asymmetric effect of oil price shock on the conditional oil price volatility. Second, along with the estimation of the conditional volatility by the EGARCH model, we use the estimates in a VECM (Vector Error Correction Model). The study thus examines the dynamic impacts of oil price volatility on industrial production, price levels, and monetary policy responses. We also approximate the monetary policy function by the yield of monetary stabilization bond. The data collected for the study ranges from 1990: M1 to 2013: M7. In the VECM analysis section, the time span is split into two sub-periods; one from 1990 to 1999, and another from 2000 to 2013, due to the U.S. CFTC (Commodity Futures Trading Commission) deregulation on the crude oil futures that became effective in 2000. This paper intends to probe the relationship between oil price uncertainty and macroeconomic variables since the structural change in the oil market became effective. Results and Conclusions - The dynamic impulse response functions obtained from the VECM show a prolonged dampening effect of oil price volatility shock on the industrial production across all sub-periods. We also find that inflation measured by CPI rises by one standard deviation shock in response to oil price uncertainty, and lasts for the ensuing period. In addition, the impulse response functions allude that South Korea practices an expansionary monetary policy in response to oil price shocks, which stems from oil price uncertainty. Moreover, a comparison of the results of the dynamic impulse response functions from the two sub-periods suggests that the dynamic relationships have strengthened since 2000. Specifically, the results are most drastic in terms of industrial production; the impact of oil price volatility shocks has more than doubled from the year 2000 onwards. These results again indicate that the relationships between crude oil price uncertainty and Korean macroeconomic activities have been strengthened since the year2000, which resulted in a structural change in the crude oil market due to the deregulation of the crude oil futures.

• KDI Journal of Economic Policy
• /
• 제27권2호
• /
• pp.239-251
• /
• 2005

본 연구는 거시경제정책이 주식시장에 미치는 영향을 외환위기 전후와 주식시장 개방 전후의 시기를 비교하여 분석하였다. 이를 위해 SUR(Seemingly Unrelated Regression) 계량분석기법을 이용, 1982년 1월부터 2004년 12월까지의 월별 자료를 분석하였다. 분석결과 다음과 같은 증거들을 발견하였다. 첫째, 전체 분석기간 동안 재정정책에 대한 정보들은 주식시장에 잘 반영되었으나 통화정책들은 그렇지 못하다는 것을 발견하였다. 둘째, 거시경제정책이 주식시장에 영향을 미치는 과정에서 외환위기가 변수로 작용한 것으로 나타났다. 구체적으로는, 외환위기 이전과 비교하여 재정정책의 충격들은 외환위기 이후 주식시장의 가격형성에 잘 반영되고 있으나 통화정책의 충격들이 주식시장에 미치는 영향은 즉각적이지 않고 시간이 걸리는 것으로 나타났다. 셋째, 주식시장 개방 이전에는 과거의 거시경제정보들이 주식시장의 가격형성에 영향을 주었으나 이러한 현상을 개방 이후에는 발견할 수 없었다. 이와 같은 결과는 주식시장 개방이 시장의 참가자들에게 적극적인 거시경제정보의 분석과 활용을 유도하는 방향으로 작용하였다는 것을 시사한다.