Effects of Monetary Policy Communication in Emerging Market Economies: Evidence from Malaysia
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Philipps-Universität Marburg
Abstract
By conducting a high-frequency event study similar to Gürkaynak et al.
(2005), we find that two factors are needed to adequately capture the effects
ofmonetary policy announcements for a non-inflation targeting emerging
market economy, Malaysia. These factors are the surprise changes in
the policy rate (Overnight Policy Rate, OPR) and the information about
the future path of monetary policy. We find that the path factor has a
strong influence on long-term government bond yields, corporate bond
yields and spreads. Our findings are indicative of the view that monetary
policy communication is mostly about revealing information pertaining to
the central bank’s assessment of the economic outlook, as opposed to an
unconditional binding commitment to follow a specific policy path.
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This item has been published with the following license: In Copyright