The Role of Monetary Policy in Macroeconomic Volatility of ASEAN-4 Countries against Oil Price Shock over Time


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Authors

  • Fatemeh Razmi
  • Azali Mohamed PhD, Professor
  • Lee Chin PhD, Associate Professor
  • Muzafar Shah Habibullah PhD, Professor

Abstract

This paper examines the impact of oil price, as a cause of economic crisis, and monetary policy through the four known channels of monetary transmission mechanism (interest rate, exchange rate, domestic credit, and stock price). Using a structural VAR model based on monthly data from 2002 to 2013 for ASEAN-4 countries, oil price and monetary transmission channels are compared pre- and post-crisis. The result indicates oil price remains an important factor in explaining price volatility, even though oil price has a weaker effect compared to a stronger effect of monetary transmission mechanism on prices. Stock price for Malaysia and domestic credit for the three others can affect the prices against oil price shock. Unlike prices, the output of all countries except Thailand is more affected by oil price post-crisis compared to pre-crisis. Different monetary transmission tools affecting industrial production are compared for the four countries.Keywords: monetary transmission; global financial crisis; oil price shockJEL Classifications: E52; N70

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Published

2015-07-13

How to Cite

Razmi, F., Mohamed, A., Chin, L., & Shah Habibullah, M. (2015). The Role of Monetary Policy in Macroeconomic Volatility of ASEAN-4 Countries against Oil Price Shock over Time. International Journal of Energy Economics and Policy, 5(3), 731–737. Retrieved from https://www.econjournals.com/index.php/ijeep/article/view/1252

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