The impact of monetary policy on financial markets in small open economies: More or less effective during the global financial crisis?

Pennings, Steven; Ramayandi, Arief; Tang, Hsiao Chink

doi:10.1016/j.jmacro.2015.01.001

Cited by 17 publications

(14 citation statements)

References 27 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…However, there is evidence that monetary policy transmission may be weak in many developing countries due to a lack of market-determined interest rates (and underdeveloped financial markets more generally), low rates of interbank competition, and exchange rate intervention (Mishra, Montiel, and Spilimbergo 2012). The effect of surprise monetary policy changes on exchange rates and stock markets has usually been smaller in non-OECD countries than OECD countries, Pennings, Ramayandi, and Tang (2015) find. Prices may also be more flexible in developing countries, weakening the transmission from financial markets to the real economy, especially in countries with histories of high inflation (Klenow and Malin 2010).…”

Section: Recovery Measuresmentioning

confidence: 99%

Macroeconomic Policy in the Time of COVID-19

Loayza¹,

Pennings²

2020

Self Cite

244

189

View full text Add to dashboard Cite

COVID-19 not only represents a worldwide public health emergency but has become an international economic crisis that could surpass the global financial crisis of 2008-09. Right now, containment and mitigation measures are necessary to limit the spread of the virus and save lives. However, they come at a cost, as shutdowns imply reducing economic activity. These human and economic costs are likely to be larger for developing countries, which generally have lower health care capacity, larger informal sectors, shallower financial markets, less fiscal space, and poorer governance. Policy makers will need to weigh carefully the effectiveness and socioeconomic consequences of containment and mitigation policies, responding to epidemiological evidence on how the virus spreads and trying to avoid unintended consequences. Economic policy in the short term should be focused on providing emergency relief to vulnerable populations and affected businesses. The short-term goal is not to stimulate the economy-which is impossible, given the supply-restricting containment measures, but rather to avoid mass layoffs and bankruptcies. In the medium term, macroeconomic policy should turn to recovery measures, which typically involve monetary and fiscal stimulus. However, in many developing countries, stimulus may be less effective because monetary transmission is weak and fiscal space and fiscal multipliers are often small. A more viable goal for macroeconomic policy in developing countries is avoiding procyclicality, ensuring the continuity of public services for the economy, and supporting the vulnerable. Because COVID-19 is truly a global shock, international coordination is essential, in economic policy, health care and science, and containment and mitigation efforts. Critical times call for well-designed government action and effective public service delivery-preserving, rather than ignoring, the practices for macroeconomic stability and proper governance that serve in good and bad times.

show abstract

Section: Recovery Measuresmentioning

confidence: 99%

Macroeconomic Policy in the Time of COVID-19

Loayza¹,

Pennings²

2020

Self Cite

244

189

View full text Add to dashboard Cite

show abstract

“…This result is inconsistent with Zettlemeyer () and Pennings et al . (), who find no robust evidence that monetary policy is more or less effective during crisis periods. However, it is not unexpected, due to the use of an alternate intraday surprise measure and narrower event windows.…”

Section: Resultsmentioning

confidence: 98%

“…Previous studies by Zettlemeyer () and Pennings et al . () find that the effectiveness of monetary policy announcements did not differ during crisis periods, but their use of daily data and measures of expectation based on spot interest rates indicate a possible and documented limitation of their results. These studies also do not examine central bank communications or multiple measures for economic states, including consumer sentiment.…”

Section: Introductionmentioning

confidence: 82%

The discrete and differential impact of monetary policy

McCredie

2018

Accounting & Finance

View full text Add to dashboard Cite

This study exploits a unique feature of the Australian monetary policy environment to determine whether economic recovery can be stimulated via central bank communications. This study finds that unexpected monetary policy announcements and communications have a significant and comparable impact on the value and volatility of the Australian foreign exchange market, suggesting that they can be used interchangeably to stimulate economic recovery. However, further analysis reveals that the state of the economy influences this impact. Specifically, during poor economic states, monetary policy actions speak louder than words, an adage that in this context provides actionable information for central bank regulators.

show abstract

“…The depreciation of the domestic currency reduces the demand for imported goods, all the while boosting demand for exports, since domestic goods become relatively cheaper than foreign goods. This leads to an increase in spending on domestic goods and an increase in aggregate demand (Pennings, Ramayandi, & Tang, 2015).…”

Section: Theoretical Basismentioning

confidence: 99%

Monetary Policy Transmission Through the Rate Channel in Some Countries in ASEAN

Dung¹,

An²

2020

AEF

View full text Add to dashboard Cite

Using a quantitative regression of table data through FEM and REM models, the study has measured the extent and direction of exchange rate impacts on the economic growth of five ASEAN countries namely, Vietnam, Indonesia, Singapore, Philippines, Malaysia, in the period of 1985-2015. The estimation results show that for every 1% rise in the real exchange rate, the multilateral force will have a positive impact, since the speed of economic growth of five countries increased by 2.09%. This result is consistent with some previous studies, especially in some developing countries. Further, the thesis has assessed the exchange rate policy in Vietnam and analyzed the situation. As a result, the authors have made some recommendations for exchange rate policy. The recommendations focus on the State’s intervention in adjusting the exchange rate and pay attention to the real exchange rate for policy evaluation. The recommendations of the thesis are consistent with the actual situation in the five ASEAN countries in order to stabilize economic growth.

show abstract

The impact of monetary policy on financial markets in small open economies: More or less effective during the global financial crisis?

Abstract: published by Elsevier. It is posted here by agreement between them. Changes resulting from the publishing process-such as editing, corrections, structural formatting, and other quality control mechanisms-may not be reflected in this version of the text.

Cited by 17 publications

References 27 publications

Macroeconomic Policy in the Time of COVID-19

Macroeconomic Policy in the Time of COVID-19

The discrete and differential impact of monetary policy

Monetary Policy Transmission Through the Rate Channel in Some Countries in ASEAN

Contact Info

Product

Resources

About