A VAR analysis of the effects of monetary policy in East Asia

Ben Fung

No 119, BIS Working Papers from Bank for International Settlements

Abstract: In this paper, a VAR model is used to study the effects of monetary policy shocks in seven East Asian economies. For each economy, the same identification scheme is imposed and the dynamic responses to a monetary shock are examined in the light of the predictions of monetary theory. The results suggest that the VAR model produces sensible impulse response functions for most of the economies, especially for the sample that ends before the 1997 Asian financial crisis. Given the openness of these economies, the exchange rate plays a significant role in the formulation of monetary policy. In order to capture explicitly the importance of the exchange rate in these economies, plausible weights are also imposed on the exchange rate to identify the model.

Keywords: VAR; monetary policy shocks; East Asia (search for similar items in EconPapers)
JEL-codes: C32 E52 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2002-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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