Interest Rates Targeting of Monetary Policy: An Open Economy SVAR Study of Malaysia

  • Zulkefly Abdul Karim Universiti Kebangsaan Malaysia
  • Bakri Abdul Karim Universiti Malaysia Sarawak
Keywords: interest rates, monetary policy, economy, Malaysia

Abstract

This paper examines the implementation of monetary policy during the interest rates targeting in a small-open economy (i.e. Malaysia) by using an open-economy structural VAR (SVAR) study. It tests the effect of foreign shocks upon domestic macroeconomic fluctuations and monetary policy, and examines how effective monetary policy is in influencing macroeconomic variables. The results show that during interest rates targeting, monetary policy plays a significant role in affecting macroeconomics variables. This finding suggests that monetary policy has an important role as a stabilization policy in a small-open economy. 

Author Biographies

Zulkefly Abdul Karim, Universiti Kebangsaan Malaysia

ABDUL KARIM, Zulkefly is an Associate Professor at the School of Economics, Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM). He earned his PhD from University of Southampton, U.K. His research interests are monetary and financial economics, public policy, capital market, banking, and international finance. Some of his works have been published in Journal of Asia Pacific Economy; Global Economic Review, Journal of Asia Pacific Business; Studies in Economics and Finance; Applied Economics Letters; International Journal of Business and Society; International Journal of Management Studies; Jurnal Ekonomi Malaysia; Jurnal Pengurusan and IIUM Journal of Economics and Management.
Author’s contact details: School of Economics, Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), 43600 Bangi, Selangor, Malaysia; e-mail: mz@ukm.my, or mzkarim72@yahoo.com.

Bakri Abdul Karim, Universiti Malaysia Sarawak

ABDUL KARIM, Bakri is a lecturer at the Department of Finance and Accounting, Faculty of Economics and Business, Universiti Malaysia Sarawak (UNIMAS). He earned his Master of Science in Finance from International Islamic University of Malaysia (IIUM). His research interests are financial economics, corporate finance, and islamic finance. Some of his works have been published in Journal of Asia Pacific Business, Studies in Economics and Finance, Journal of Risk Finance, Journal of Applied Science, International Journal of Business and Society, and International Journal of Islamic and Middle Eastern Finance and Management.
    Author’s contact details: Department of Finance and Accounting, Faculty of Economics and Business, Universiti Malaysia Sarawak, 94300 Kota Samarahan, Sarawak, Malaysia; e-mail: akbakri@feb.unimas.my

References

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Published
2014-02-28
How to Cite
Karim, Z. A., & Karim, B. A. (2014). Interest Rates Targeting of Monetary Policy: An Open Economy SVAR Study of Malaysia. Gadjah Mada International Journal of Business, 16(1), 1-22. Retrieved from https://journal.ugm.ac.id/v3/gamaijb/article/view/15456
Issue
Vol 16 No 1 (2014): January-April
Section
Articles

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