- Title
- An investigation of the interrelations among macroeconomic variables in Thailand under inflation-targeting for the post-financial crisis period
- Creator
- Hossain, Akhand Akhtar; Arwatchanakarn, Popkarn
- Relation
- Journal of Southeast Asian Economies Vol. 38, Issue 1, p. 51-80
- Publisher Link
- http://dx.doi.org/10.1355/ae38-1c
- Publisher
- Institute of Southeast Asian Studies (ISEAS)
- Resource Type
- journal article
- Date
- 2021
- Description
- This paper employs a five-variable monetary policy transmission model within a structural vector error correction (SVEC) modelling framework for Thailand to examine the relative contributions of the policy interest rate and a monetary aggregate of real output and prices. The model is estimated using quarterly data for the 2000Q2-2019Q4 period after imposing both short- and long-term restrictions. The empirical results suggest that the policy interest rate and the monetary aggregate contribute significantly to the forecast-error-variances of real output and prices, irrespective of whether the policy interest rate or the monetary aggregate appears to be the lead variable. That a shock to the money stock contributes to real output and to prices, whether treated as a policy instrument or as an endogenously determined variable within a generalized macroeconomic system, is consistent with the implication of classical monetary theory, which suggests the existence of a long-run equilibrium relation among money, real output, prices, interest rates and exchange rates. The results also support a co-integral relation among the four variables in Thailand. A major policy implication is that an inflation-targeting central bank such as the Bank of Thailand can deploy a monetary aggregate as a monetary policy instrument, particularly in a low inflation environment.
- Subject
- inflation-targeting; interest rate; monetary aggregate; monetary policy; SCEV model; Thailand; SDG 10; Sustainable Development Goals
- Identifier
- http://hdl.handle.net/1959.13/1437161
- Identifier
- uon:40256
- Identifier
- ISSN:2339-5095
- Language
- eng
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Goal 10: Reduced Inequalities
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