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Roles of housing wealth and financial wealth in monetary transmission mechanism in Malaysia


Citation

Cheah, Siew Pong and Law, Siong Hook (2017) Roles of housing wealth and financial wealth in monetary transmission mechanism in Malaysia. Jurnal Ekonomi Malaysia, 51 (1). pp. 79-88. ISSN 0126-1962

Abstract

This study analyses the wealth channel of the monetary policy transmission mechanism in Malaysia. Given the underdevelopment and non-inclusion of housing wealth in previous literature regarding the wealth channel in Malaysia, this research aims to find out (1) whether monetary policy shocks significantly affect asset prices, (2) whether asset prices fluctuations have significant influences on household consumption, and (3) whether house prices and stock prices have significant and equivalent roles in the operation of the wealth channel. In order to fulfill the research objectives, this study employs a methodological framework of structural vector autoregression (SVAR). By constructing a SVAR model with 5 endogenous variables and 68 quarterly observations in Malaysia from 1999Q1 to 2015Q4, the findings support the positive impacts from monetary expansion to the asset price level, and later from asset price fluctuation on aggregate consumption spending in Malaysia. The effect of monetary policy is mainly transmitted through financial wealth, in particular, the stock market, whereas the contribution of housing wealth is virtually nil in the wealth channel.


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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
Publisher: Penerbit Universiti Kebangsaan Malaysia
Keywords: Monetary policy; Malaysia; Structural VAR; House price; Stock price
Depositing User: Nabilah Mustapa
Date Deposited: 07 Sep 2017 04:30
Last Modified: 07 Sep 2017 04:30
URI: http://psasir.upm.edu.my/id/eprint/57086
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