Structural Vector Autoregressive Analysis of Monetary Policy in Thailand

Abstract

This paper highlights the importance of monetary policy transmission mechanism in Thailand since the 1997 financial crisis and then undertakes an empirical investigation of Thailand monetary policy. This study makes effort to address both two aspects of monetary transmission mechanism, namely channels of monetary policy and the effect of monetary policy shocks on key macroeconomic variables. To address these issues, the paper specifies structural vector autoregressive (SVAR) models and estimates them using quarterly data from 1997q3 to 2014q4. The identification schemes used in this paper follow Kim and Roubini and Raghavan, Silvapulle, and Athanasopoulos with some modifications. The overall result is that the identifying restrictions used in the SVAR seem to appropriately identify a monetary policy shock even though the exchange rate puzzle is found. The results show that interest rate and monetary aggregate have played the dominant channels of monetary transmission mechanism in Thailand, while an exchange rate channel is decreasingly significant. In addition, Thailand economy is somewhat exposed to the foreign sector especially for the world price of oil and the U.

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Monetary Policy Rule and its Performance under Inflation Targeting in Thailand

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Analysis of the Effectiveness of Monetary Policy Transmission (Evidence in Indonesia and Thailand)

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