Monetary condition index and its changing transmission on macro-economic variables

Arab Economic and Business Journal Pub Date : 2018-12-01 DOI:10.1016/j.aebj.2018.10.001

Iqra Aslam Memon , Hummaira Jabeen

{"title":"Monetary condition index and its changing transmission on macro-economic variables","authors":"Iqra Aslam Memon , Hummaira Jabeen","doi":"10.1016/j.aebj.2018.10.001","DOIUrl":null,"url":null,"abstract":"<div><p>It has been known with time that no single transmission mechanism is enough to understand the monetary policy stance of that country. The objective of this paper is combine two transmission channel, interest rate and exchange rate so as to construct monetary condition index (MCI) for the gulf countries, namely Bahrain, Iraq, Kuwait, Oman, Qatar, Kingdom of Saudi Arabia and United Arab Emirates, so as to forecast its impact on CPI and GDP and to suggest policymakers regarding the monetary policy of the gulf countries. For this purpose, the paper applies Principal Component Analysis and Vector Auto-Regression method to construct MCI and to analyze its impulse response on CPI and GDP. This paper concludes that MCI can be used as an indicator to predict CPI and GDP of Bahrain and Qatar in long run and as an indicator to predict the GDP of Oman in medium and long run but it cannot be used as an indicator to predict CPI and GDP of Kuwait and KSA. Furthermore, this paper also concludes that strong monetary policy is needed to strengthen their economic condition.</p></div>","PeriodicalId":100115,"journal":{"name":"Arab Economic and Business Journal","volume":"13 2","pages":"Pages 111-124"},"PeriodicalIF":0.0000,"publicationDate":"2018-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/j.aebj.2018.10.001","citationCount":"6","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Arab Economic and Business Journal","FirstCategoryId":"1085","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S2214462517301202","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}

引用次数: 6

Abstract

It has been known with time that no single transmission mechanism is enough to understand the monetary policy stance of that country. The objective of this paper is combine two transmission channel, interest rate and exchange rate so as to construct monetary condition index (MCI) for the gulf countries, namely Bahrain, Iraq, Kuwait, Oman, Qatar, Kingdom of Saudi Arabia and United Arab Emirates, so as to forecast its impact on CPI and GDP and to suggest policymakers regarding the monetary policy of the gulf countries. For this purpose, the paper applies Principal Component Analysis and Vector Auto-Regression method to construct MCI and to analyze its impulse response on CPI and GDP. This paper concludes that MCI can be used as an indicator to predict CPI and GDP of Bahrain and Qatar in long run and as an indicator to predict the GDP of Oman in medium and long run but it cannot be used as an indicator to predict CPI and GDP of Kuwait and KSA. Furthermore, this paper also concludes that strong monetary policy is needed to strengthen their economic condition.

查看原文本刊更多论文

货币状况指数及其对宏观经济变量的变化传导

随着时间的推移，人们已经知道，没有一种单一的传导机制足以理解一个国家的货币政策立场。本文的目的是结合利率和汇率这两个传导渠道，构建海湾国家巴林、伊拉克、科威特、阿曼、卡塔尔、沙特阿拉伯王国和阿联酋的货币状况指数(monetary condition index, MCI)，预测其对CPI和GDP的影响，为海湾国家的货币政策制定者提供建议。为此，本文运用主成分分析和向量自回归方法构建MCI，并分析其对CPI和GDP的脉冲响应。本文得出结论，MCI可以作为长期预测巴林和卡塔尔的CPI和GDP的指标，也可以作为中长期预测阿曼的GDP的指标，但不能作为预测科威特和沙特的CPI和GDP的指标。此外，本文还得出结论，需要强有力的货币政策来改善它们的经济状况。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Arab Economic and Business Journal

自引率

0.00%

发文量