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 The Islamic Chamber of Commerce , Industry and Agriculture (ICCIA)

The Transmission of Financial Stress and its Interactions with Monetary Policy Responses in the ASEAN-5 Economies

Source : Tng Boon Hwa

Category : Economy‏

Publish Date : August 14, 2015

ABOUT PUBLICATION

This study aims to analyse the determinants of financial stress, the impact of financial stress on the real economy and the interactions between monetary policy and financial stress in the ASEAN-5 economies. Results from a panel model of the determinants of financial stress indicates the significance of 3 global and regional variables - US financial stress, world GDP, regional financial contagion – and one domestic variable, bank credit, as important sources of financial stress. Through a subsequent SVAR analysis, financial stress is found to have adverse effects on the real economy, with large initial effects followed by a gradual dissipation. The results also suggest that the central banks in Malaysia, the Philippines and Thailand tend to lower their policy interest rates when financial stress increases.

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