THREE ESSAYS ON THE MACROECONOMICS OF MALAYSIA

MOHAMAD KHAIR AFHAM BIN MUHAMAD SENAN, MOHAMAD KHAIR AFHAM (2020) THREE ESSAYS ON THE MACROECONOMICS OF MALAYSIA. Doctoral thesis, UNIVERSITI OF LONDON.

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Abstract

This thesis consists of three chapters. The first chapter examines the impact of monetary policy shocks on disaggregated loans from conventional and Islamic banks in Malaysia by employing Factor Augmented VAR (FAVAR). The results suggest that expansionary monetary policy reduces output, price level, and bank lending. The results validate the role of Islamic banks in the monetary transmission mechanism and show that loans from Islamic banks are more responsive to monetary policy shocks compared to conventional loans. We also found strong heterogeneity across sectors and purposes loans from these two types of banks. The second chapter examines the effects of credit supply shocks on the economy of Malaysia by using Bayesian SV AR approach and implementing the sign restrictions to identify the shocks. We found that expansionary credit supply shock increases GDP growth, inflation, lending growth, and policy rate and does have substantial importance in explaining the forecast variance of macroeconomics variables in Malaysia. We further breaking down the loans to its components: households and non-financial corporations and found some differences of the responses and differences on the relative importance of credit supply shocks in both models. The third chapter studied the impacts of US Economic Policy Uncertainty (EPU) on the economy of Malaysia. This chapter uses a Bayesian SVAR with the sign and zero restrictions, but we expand the model with block exogeneity, as Malaysia is a small open economy. The results show that US economic policy uncertainty exerts negative impacts on the Malaysian economy. We also found that US EPU shocks do explain considerable fractions of forecast variance of the macroeconomic variables of Malaysia. We further expand the model to include financial stability and forward-looking economic indicator for Malaysia and found that US EPU shock negatively affects both.

Item Type:	Thesis (Doctoral)
Subjects:	H Social Sciences > HB Economic Theory
Depositing User:	Encik Mohd Zulkarnain Hassan bin Mohd Zainudin
Date Deposited:	29 Oct 2024 16:27
Last Modified:	29 Oct 2024 16:27
URI:	https://repositori.mohe.gov.my/id/eprint/39

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