A Comparative study on the impacts of the US monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : Malaysia versus Hong Kong

Since the initiation of quantitative easing (QE) measures in the US in 2008, the Federal Reserve has followed up with a QE tapering in 2013 and a policy normalization measure in 2015 where the US finally raised its interest rate for the first time in nearly a decade. Such monetary operations in the...

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Main Author:	Phang, Mei Syuen
Format:	Thesis
Language:	English English
Published:	2018
Subjects:	HC94-1085 By region or country
Online Access:	https://eprints.ums.edu.my/id/eprint/38515/1/ABSTRACT.pdf https://eprints.ums.edu.my/id/eprint/38515/2/FULLTEXT.pdf
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spelling	my-ums-ep.385152024-04-23T06:53:21Z A Comparative study on the impacts of the US monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : Malaysia versus Hong Kong 2018 Phang, Mei Syuen HC94-1085 By region or country Since the initiation of quantitative easing (QE) measures in the US in 2008, the Federal Reserve has followed up with a QE tapering in 2013 and a policy normalization measure in 2015 where the US finally raised its interest rate for the first time in nearly a decade. Such monetary operations in the US might have impacted the Malaysian market in the form of external shocks. This thesis aims to examine the effects of U.S. monetary policy expectations on macroeconomic fluctuations on Malaysia, a small and open economy. This thesis estimates a structural VAR model using monthly data from January 2000 to February 2016 with Friedman's hypothesis as a guiding principle. The result suggests that the Malaysian ringgit and industrial production were mostly affected by the U.S financial market variables. In comparison, Malaysia's inflation rate was relatively less affected by this external shock as compared to oil price shocks. This shows that the Malaysian ringgit serves as the primary absorber of the external shocks. Given that Malaysia operates under a flexible exchange rate regime, the nominal exchange rate acts as a natural automatic stabilizer when the economy faces external disturbances. Besides, based on previous studies regarding the choice of exchange rate regimes in absorbing external shocks, the results were found to be mixed. Therefore, this thesis also aims to examine the effectiveness and the role of flexible exchange rate regime against external shocks based on Friedman's hypothesis, after determining the impact of external shocks towards macroeconomic fluctuations in Malaysia. In order to show the differences between the bipolar choices of the exchange rate regime, this study will consider data from Hong Kong. With the two markets occupying either end of the spectrum, the contrast should be clearer and the conclusions more clear-cut. Consistent with prior results, the result indicates that interest rates in Hong Kong are more reactionary to U.S. monetary shocks compared to Malaysia. In general, the evidence is consistent with Friedman's hypothesis. 2018 Thesis https://eprints.ums.edu.my/id/eprint/38515/ https://eprints.ums.edu.my/id/eprint/38515/1/ABSTRACT.pdf text en public https://eprints.ums.edu.my/id/eprint/38515/2/FULLTEXT.pdf text en validuser masters Universiti Malaysia Sabah Fakulti Kewangan Antarabangsa Labuan
institution	Universiti Malaysia Sabah
collection	UMS Institutional Repository
language	English English
topic	HC94-1085 By region or country
spellingShingle	HC94-1085 By region or country Phang, Mei Syuen A Comparative study on the impacts of the US monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : Malaysia versus Hong Kong
description	Since the initiation of quantitative easing (QE) measures in the US in 2008, the Federal Reserve has followed up with a QE tapering in 2013 and a policy normalization measure in 2015 where the US finally raised its interest rate for the first time in nearly a decade. Such monetary operations in the US might have impacted the Malaysian market in the form of external shocks. This thesis aims to examine the effects of U.S. monetary policy expectations on macroeconomic fluctuations on Malaysia, a small and open economy. This thesis estimates a structural VAR model using monthly data from January 2000 to February 2016 with Friedman's hypothesis as a guiding principle. The result suggests that the Malaysian ringgit and industrial production were mostly affected by the U.S financial market variables. In comparison, Malaysia's inflation rate was relatively less affected by this external shock as compared to oil price shocks. This shows that the Malaysian ringgit serves as the primary absorber of the external shocks. Given that Malaysia operates under a flexible exchange rate regime, the nominal exchange rate acts as a natural automatic stabilizer when the economy faces external disturbances. Besides, based on previous studies regarding the choice of exchange rate regimes in absorbing external shocks, the results were found to be mixed. Therefore, this thesis also aims to examine the effectiveness and the role of flexible exchange rate regime against external shocks based on Friedman's hypothesis, after determining the impact of external shocks towards macroeconomic fluctuations in Malaysia. In order to show the differences between the bipolar choices of the exchange rate regime, this study will consider data from Hong Kong. With the two markets occupying either end of the spectrum, the contrast should be clearer and the conclusions more clear-cut. Consistent with prior results, the result indicates that interest rates in Hong Kong are more reactionary to U.S. monetary shocks compared to Malaysia. In general, the evidence is consistent with Friedman's hypothesis.
format	Thesis
qualification_level	Master's degree
author	Phang, Mei Syuen
author_facet	Phang, Mei Syuen
author_sort	Phang, Mei Syuen
title	A Comparative study on the impacts of the US monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : Malaysia versus Hong Kong
title_short	A Comparative study on the impacts of the US monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : Malaysia versus Hong Kong
title_full	A Comparative study on the impacts of the US monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : Malaysia versus Hong Kong
title_fullStr	A Comparative study on the impacts of the US monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : Malaysia versus Hong Kong
title_full_unstemmed	A Comparative study on the impacts of the US monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : Malaysia versus Hong Kong
title_sort	comparative study on the impacts of the us monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : malaysia versus hong kong
granting_institution	Universiti Malaysia Sabah
granting_department	Fakulti Kewangan Antarabangsa Labuan
publishDate	2018
url	https://eprints.ums.edu.my/id/eprint/38515/1/ABSTRACT.pdf https://eprints.ums.edu.my/id/eprint/38515/2/FULLTEXT.pdf
_version_	1804890320899407872

A Comparative study on the impacts of the US monetary shocks on macroeconomic fluctuations under flexible and fixed exchange rate regimes : Malaysia versus Hong Kong

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