Monetary and Exchange Rate Policy in Malaysia before the Asian Crisis

This paper provides a case study to characterize the monetary policy regime in Malaysia, from a medium- and long-term perspective. Specifically, we ask how the central bank of Malaysia, Bank Negara Malaysia (BNM), has structured its monetary policy regime, and how it has conducted monetary and exchange rate policy under the regime. By conducting three empirical analyses, we characterize the monetary and exchange rate policy regime in Malaysia by three intermediate solutions on three vectors: the degree of autonomy in monetary policy, the degree of variability of the exchange rate, and the degree of capital mobility.

Monetary Policy Effects in Developing Countries with Minimum Wages

Using a Dynamic General Equilibrium (DGE) model, this study examines the effects of monetary policy in economies where minimum wages are bound. The findings show that the monetary-policy effect on a binding-minimum-wage economy is relatively small and quite persistent. This result suggests that these two characteristics of monetary policy in the minimum-wage model are rather different from those in the union-negotiation model which is often assumed to account for industrial economies.

Monetary Systems in Developing Countries: An Unorthodox View

This paper analyzes some recent theoretical and practical evidence in terms of economic results of different exchange rate systems. It begins with a historical review and a summary of fixed versus flexible exchange rate systems. Then it compares the experiences of recent currency unions, mostly unilateral, and their relative economic performance during the past currency crises in Latin America, East Asia and Eastern Europe. A set of issues is discussed in order to weigh the overall costs and benefits for several economies. These issues include exchange rates, GDP performance, inflation rates and foreign reserves. The case of Argentina is also considered separately, comparing mostly seigniorage costs and interest-rate savings. The benefits and costs of the producers (central banks/governments) and the consumers (citizens) of money are discussed separately. Free banking is also considered in a fast-changing world where there will probably be fewer but better currencies. Not just the euro is a reality now, but maybe the "amero" and the "worldo" or the "mondo" very soon.

A New Measurement for International Fragmentation of the Production Process: An International Input-Output Approach

The paper investigates the possibility of constructing a new measurement for analysing international fragmentation of the production process. It asserts that the current usage of relevant data, whether the trade shares of parts and components or the index of Vertical Specialisation, is quite unsatisfactory for measuring the phenomenon, since they critically lack the overall perspective of the entire structure of production chains. 　The new measurement is formulated such that it captures every aspect of the vertical sequence of production linkages. It is based on the input-output model of Average Propagation Lengths, recently developed by Eric Dietzenbacher and others, which show the average number of production stages that are passed through for an exogenous change in one industry to affect another. By applying this model to the data of the Asian International Input-Output Tables, the index is able to measure the international dimension of production sharing and division of labour in East Asia.

An Empirical Analysis of the Monetary Policy Reaction Function in India

This paper empirically analyzes India’s monetary policy reaction function by applying the Taylor (1993) rule and its open-economy version which employs dynamic OLS. The analysis uses monthly data from the period of April 1998 to December 2007. When the simple Taylor rule was estimated for India, the output gap coefficient was statistically significant, and its sign condition was found to be consistent with theoretical rationale; however, the same was not true of the inflation coefficient. When the Taylor rule with exchange rate was estimated, the coefficients of output gap and exchange rate had statistical significance with the expected signs, whereas the results of inflation remained the same as before. Therefore, the inflation rate has not played a role in the conduct of India’s monetary policy, and it is inappropriate for India to adopt an inflation-target type policy framework.

Agglomeration versus Fragmentation:A Comparison of East Asia and Europe

Inspired by the observed contrasting patterns of industrial distribution in East Asia and Europe, this paper conducts an empirical clarification of the difference in spatial relationships among countries within a region for the electric machinery industry by use of spatial econometric analysis. The results indicate that, while production in the electric machinery industry in a country is positively correlated with that of neighboring countries in East Asia, there is no significant spatial correlation in Europe. Such a difference in spatial interdependence has important implications for economic development in those regions.

Effectiveness of the monetary policy framework in present-day India : have financial variables functioned as useful policy indicators

In April 1998, the RBI, the Indian central bank, formally announced a shift in its policy framework from monetary targeting to a multiple indicator approach, and since then, under this framework, the bank has considered a range of economic and financial variables as policy indicators for drawing policy perspectives. This paper aims to examine the effectiveness of this current policy framework in India by analyzing the causal relationships of each indicator variable on the objective variables. The results reveal that, except for bank credit, all indicator variables considered in this study have a causal relationship with at least either output or price level, suggesting that most preannounced economic and financial variables have served as useful policy indicators under the multiple indicator approach.

The Central Bank and bank credits in the Philippines : a survey on effectiveness of monetary policy and its measures

In the post-Asian crisis period, bank loans to the manufacturing sector have shown a slow recovery in the affected countries, unexceptionally in the Philippines. This paper provides a literacy survey on the effectiveness of the Central Bank’s monetary policy and the responsiveness of the financial market, and discusses on the future works necessary to better understand the monetary policy effectiveness in the Philippines. As the survey shows, most previous works focus on the correlation between the short-term policy rates and during the period of monetary tightening and relatively less interest in quantitative effectiveness. Future tasks would shed lights on (1) the asset side – other than loan outstanding – of banks to analyze their behavior/preference in structuring portfolios, and (2) the quantitative impacts during the monetary easing period.

Production fragmentation, upstreamness, and value-added : evidence from factory Asia 1990-2005

We exploit the recent release of the 2005 Asian Input-Output Matrix to dress a picture of the geographic fragmentation of value added in Factory Asia from 1990 to 2005. We document 3 stylized facts. The first is that the average share of foreign value added embedded in production rose by about 7 percentage points between 1990 and 2005, from 9% to 16%. The second is that, contrary to popular belief, China's production embeds a smaller share of foreign value added than other Factory Asia countries'. Between 1990 and 2005 among Factory Asia countries China grew most after Japan as a source of value added to other countries' production. Third, country-industries at the upstream and downstream extremities of the supply chain embed a smaller share of foreign value added than those with intermediate levels of upstreamness.

Asset composition of the Philippines' universal and commercial banks : monetary policy or self-discipline?

The central bank of the Philippines (Bangko Sentral ng Pilipinas, BSP) has improved its monetary policy measures since the 2000s. After rationalizing the country's banking sector since late-1990s, its monetary policy and the uniiversal/commercial banks' (UCBs) behavior in allocating their assets has changed since mid-2000s. Though further and more detailed studies are nesessary, based on the results of simple correlation analyses conducted in this paper suggest a possible mixture of the country's monetary policy and their own decision-making in asset allocations, instead of a "follow-through" attitude.

A unified framework of trade in value added : physical, monetary, exchange rates, and GHG emissions

Koopman et al. (2014) developed a method to consistently decompose gross exports in value-added terms that accommodate infinite repercussions of international and inter-sector transactions. This provides a better understanding of trade in value added in global value chains than does the conventional gross exports method, which is affected by double-counting problems. However, the new framework is based on monetary input--output (IO) tables and cannot distinguish prices from quantities; thus, it is unable to consider financial adjustments through the exchange market. In this paper, we propose a framework based on a physical IO system, characterized by its linear programming equivalent that can clarify the various complexities relevant to the existing indicators and is proved to be consistent with Koopman's results when the physical decompositions are evaluated in monetary terms. While international monetary tables are typically described in current U.S. dollars, the physical framework can elucidate the impact of price adjustments through the exchange market. An iterative procedure to calculate the exchange rates is proposed, and we also show that the physical framework is also convenient for considering indicators associated with greenhouse gas (GHG) emissions.