scholarly journals Divisia Index Monetary Aggregates: Do they Matter for Monetary Policy in Malaysia?

2020 ◽  
Author(s):  
Jauhari Dahalan
Keyword(s):  
Monetary Policy ◽  
Dynamic Error ◽  
Monetary Aggregate ◽  
Divisia Index ◽  
Monetary Aggregates ◽  
Long Run ◽  
Excellent Candidate ◽  
Out Of Sample ◽  
Alternative Measures ◽  
Better Than

Divisia for narrowly and broadly defined monetary aggregate of a developing country Malaysia, are constructed. Unlike the Divisia for narrowly defined monetary aggregate MI, the Divisia for broader defined monetary aggregate M2 does show significant differences in both level and growth rates that signified the degree of the important and usefulness of Divisia index in formulating the monetary policy We ascertained that there exist long-run relationships between all measures of monetary aggregates in this study with inflations. By constructing dynamic error-correction models for all the alternative measures of monetary aggregates. we performed out-of-sample forecasting for three different periods. Analysis of the forecasting statistics indicates that the Divisia monetary aggregates performed better than their simple-sum counterparts in forecasting ability. We conclude that Divisia monetary aggregate namely Divisia M2, has the best forecast ability among all. As such, Divisia M2 can serve as an excellent candidate as a target or indicator in formulating the monetary policy for Malaysia.  

scholarly journals Re-estimation of Keynesian Model by Considering Critical Events and Multiple Cointegrating Vectors

2015 ◽  
Vol 54 (2) ◽  
pp. 123-145
Author(s):  
Hafsa Hina ◽  
Abdul Qayyum
Keyword(s):  
Exchange Rate ◽  
Random Walk ◽  
Error Correction ◽  
Unit Root ◽  
Dynamic Error ◽  
Correction Model ◽  
Keynesian Model ◽  
Long Run ◽  
Out Of Sample ◽  
Short Run

This study employs the Mundell (1963) and Fleming (1962) traditional flow model of exchange rate to examine the long run behaviour of rupee/US $ exchange rate for Pakistan economy over the period 1982:Q1 to 2010:Q2. This study investigates the effect of output levels, interest rates and prices and different shocks on exchange rate. Hylleberg, Engle, Granger, and Yoo (HEGY) (1990) unit root test confirms the presence of non-seasonal unit root and finds no evidence of biannual and annual frequency unit root in the level of series. Johansen and Juselious (1988, 1992) likelihood ratio test indicates three long-run cointegrating vectors. Cointegrating vectors are uniquely identified by imposing structural economic restrictions on purchasing power parity (PPP), uncovered interest parity (UIP) and current account balance. Finally, the short-run dynamic error correction model is estimated on the basis of identified cointegrated vectors. The speed of adjustment coefficient indicates that 17 percent of divergence from long-run equilibrium exchange rate path is being corrected in each quarter. US war with Afghanistan has significant impact on rupee in short run because of high inflows of US aid to Pakistan after 9/11. Finally, the parsimonious short run dynamic error correction model is able to beat the naïve random walk model at out of sample forecasting horizons. JEL Classification: F31, F37, F47 Keywords: Exchange Rate Determination, Keynesian Model, Cointegration, Out of Sample Forecasting, Random Walk Model

scholarly journals INCORPORATING RISKY ASSETS IN DIVISIA MONETARY AGGREGATES

2003 ◽  
Vol 3 (1) ◽  
pp. 98-120
Author(s):  
Leigh Drake ◽  
Andy Mullineux ◽  
Juda Agung
Keyword(s):  
Mutual Funds ◽  
Money Demand ◽  
Demand Function ◽  
Monetary Aggregate ◽  
Risky Assets ◽  
Monetary Aggregates ◽  
Divisia Monetary Aggregates ◽  
Long Run ◽  
Causality Tests ◽  
Monetary Assets

Capital uncertain or risky assets are typically excluded from traditional broad monetary aggregates. Barnett et al (1997), however, extend the Divisia aggregation methodology to incorporate such assets. In addition, recent evidence provided by Drake et al (1998) suggests that risky assets are close substitutes for monetary assets. This paper constructs “wide” Divisia monetary aggregates which include risky assets such as unit trusts (mutual funds), equities and bonds, and contrasts their empirical properties with conventional Divisia and simple sum broad money aggregates. The key finding in the paper is that a “wide” monetary aggregate, which incorporates unit trusts, exhibits a stable long run and dynamic money demand function, has good leading indicator properties in the context of Granger causality tests, and tends to outperform all other aggregates on the basis of non-nested tests.JEL : E41, C43, E52 

scholarly journals Divisia and Simple Sum Monetary Aggregates: Any Empirical Relevance for Turkey?

2018 ◽  
Vol 7 (1) ◽  
pp. 175-206
Author(s):  
Umurcan Polat
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Money Supply ◽  
A Priori ◽  
Alternative Measure ◽  
Real Activity ◽  
Divisia Index ◽  
Policy Regimes ◽  
Monetary Aggregates ◽  
Divisia Monetary Aggregates

AbstractIn consideration of channels through which monetary policy affects economic activity, the monetary aggregates have been mostly ignored by the monetary authorities instead of which shortrun interest rates have been given a priori role. These monetary aggregates are largely argued to fail in measuring the effectiveness of different monetary policy regimes in forecasting the macroeconomic fundamentals. Grounded on the “Barnett critique”, the formation of traditional simple-sum monetary aggregates assuming for perfect substitution among the components of the money supply is blamed for such a failure of money in explaining the real activity. Given increasing varieties of financial assets which have completely different “moneyness”, it is important to provide an alternative measure of the money supply. Hereby, the Divisia monetary aggregates which give different weights to different assets have arisen as an alternative approach. In this study, a Divisia index is constructed to test its predictive power on quantities and prices compared to its simple sum counterpart. Accordingly, a Divisia index is built-up for Turkish economy for the period 2006-2016 to see whether the utilization of the Divisia monetary aggregates in the conduct of monetary policy makes any difference compared to that of traditional simple sum money supply. Under different specifications, though the relative power of the Divisia aggregates in predicting quantity and price variables is found, still, it can be argued that theoretically well-rounded formation of the Divisia index is not that much empirically justified for the case of Turkey.

scholarly journals The role of money in monetary policy design of modern central banks

2007 ◽  
Vol 59 (4) ◽  
pp. 560-578
Author(s):  
Gradimir Kozetinac
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Policy Design ◽  
Central Banks ◽  
Policy Regime ◽  
Important Indicator ◽  
Indicator Variable ◽  
Monetary Aggregates ◽  
Long Run

This paper considers the role of money, particularly the role of monetary analysis in monetary policy-making. During the last three decades, many central banks changed their monetary policy considerably. In the late 1970s money and the long-run effects of its movements on inflation were in the center-stage of economic policy. Given the breakdown of the relationship between monetary aggregates and goal variables such as inflation, many countries in the world have recently adopted inflation targeting as their monetary policy regime. The direct control of money supply lost importance. Central bankers operate in an environment of high uncertainty regarding the functioning of the economy. In such a complex environment, a single model or a limited set of indicators is not a sufficient guide for monetary policy. Monetary aggregates continue to be an important indicator variable concludes the author.

A bivariate optimal replacement policy for a repairable system

1994 ◽  
Vol 31 (4) ◽  
pp. 1123-1127 ◽  
Author(s):  
Yuan Lin Zhang
Keyword(s):  
Explicit Expression ◽  
Average Cost ◽  
Replacement Policy ◽  
Repairable System ◽  
Optimal Replacement ◽  
Long Run ◽  
Optimal Replacement Policy ◽  
Working Age ◽  
Better Than

In this paper, a repairable system consisting of one unit and a single repairman is studied. Assume that the system after repair is not as good as new. Under this assumption, a bivariate replacement policy (T, N), where T is the working age and N is the number of failures of the system is studied. The problem is to determine the optimal replacement policy (T, N)∗such that the long-run average cost per unit time is minimized. The explicit expression of the long-run average cost per unit time is derived, and the corresponding optimal replacement policy can be determined analytically or numerically. Finally, under some conditions, we show that the policy (T, N)∗ is better than policies N∗ or T∗.

The “out-of-sample” performance of long run risk models

2013 ◽  
Vol 107 (3) ◽  
pp. 537-556 ◽  
Author(s):  
Wayne Ferson ◽  
Suresh Nallareddy ◽  
Biqin Xie
Keyword(s):  
Risk Models ◽  
Long Run ◽  
Out Of Sample ◽  
Long Run Risk

Monetary Aggregate and Monetary Policy.

1976 ◽  
Vol 31 (3) ◽  
pp. 1019
Author(s):  
Warren L. Coats ◽  
Richard G. Davis
Keyword(s):  
Monetary Policy ◽  
Monetary Aggregate

scholarly journals Tenure, Faculty Contracts and Bargaining Conflict

2017 ◽  
Vol 28 (3) ◽  
pp. 47-70
Author(s):  
Derek Hum
Keyword(s):  
Opportunity Cost ◽  
Research Output ◽  
Job Security ◽  
University Administrators ◽  
Government Grants ◽  
Faculty Unions ◽  
Long Run ◽  
Academic Employment ◽  
The University ◽  
Better Than

Tenure is sometimes charged as giving faculty lifetime job security, with little accountability and sporadic monitoring of performance. Scholars have traditionally defended tenure as necessary for academic freedom. This paper takes a different approach by examining the academic "employment contract relationship," and explaining how tenure can lead to bargaining conflict. Tenure is costly to the university but extremely valued by the faculty member. The opportunity cost of granting tenure to someone is the lost teaching and research output of younger people who cannot be hired in future. Tenure is necessary because without it, incumbents would never recommend hiring people who might be better than they are, for fear of being replaced. Tenure is also efficient because faculty have better information about incumbents than either university administrators or outside consultants. Tenure is therefore necessary to motivate older faculty to hire the best. With staff budget dollars able to be shifted back or forwards across time periods, tenure secures the truthful revelation of who are the good candidates over all periods, and the university is guaranteed that those who are in the best position to judge (namely, faculty rather than administrators) have every incentive to make the best decisions. It follows, then, that the naive suggestion to get rid of tenure so that older, expensive professors can be fired and replaced with younger, cheaper professors would be disastrous in the long run. A simple model is presented explaining why (a) recent cutbacks in government grants, (b) cost pressures on university budgets, (c) limits to tuition increases, and (d) declining interests in attending a less "excellent" university have all resulted in pressure on tenure. Because there is no previously agreed-to mechanism in place to adjust staff, university administrations and faculty unions are not so much bargaining over an acceptable contract outcome as they are contesting the very rules of the bargaining game. Accordingly, unless tenure is reconsidered, universities may increasingly face bargaining conflict. Tenure could be reformed by making the term of tenure limited but related to rank, and establishing a maximum eligibility period during which a faculty may apply for promotion.

scholarly journals MONETARY POLICY AND TELECOMMUNICATION OUTPUT IN NIGERIA

2020 ◽  
Vol 3 (2) ◽  
pp. 62-73
Author(s):  
John Abiodun Akinde ◽  
Elijah Oludayo
Keyword(s):  
Monetary Policy ◽  
Money Supply ◽  
Negative Relationship ◽  
Negative Influence ◽  
Favourable Effect ◽  
Data Series ◽  
Long Run ◽  
Integration Test ◽  
Short Run ◽  
Positive Effect

Different policies impact on the growth of the telecommunication sector in Nigeria. One of these policies which influence the expansion or contraction of the telecommunication output is monetary policy. To this end, this research examined the effect of monetary policy on telecommunication output in Nigeria. For the purpose of analysis, time series secondary data were sourced from Central Bank of Nigeria (CBN) statistical bulletin covering the periods1986 to 2018. Autoregressive Distributed Lag (ARDL) technique was employed after examining the stationarity of the data series using Augmented Dickey-Fuller technique. The bound co-integration test revealed that there is long run equilibrium between the monetary policy variables employed and telecommunication output. The ARDL result revealed that money supply had significant and positive effect on telecommunication output in the short and long run; liquidity ratio produced an insignificant and negative relationship with telecommunication output in the short run and insignificant positive effect in the long run; exchange rate had insignificant negative effect in the short run and a significant positive effect on telecommunication output in the long run; consumer price index had significant negative influence on telecommunication outputboth in the short run and long run. The study concluded that monetary policy stimulates telecommunication output in Nigeria. Thus, it was recommended that the monetary authority should pursue an expansionary monetary policy to sustain the positive influence of money supply on telecommunication output in Nigeria while rolling out policy to reduce the liquidity ratio of banks in the short run but increase it in the long run so that the long term favourable effect of liquidity ratio can be felt on telecommunication output.  

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