Monetary Policy and Asset Prices in a Small Open Economy: A Factor-Augmented VAR Analysis for Singapore

The ongoing global financial turmoil has revived the question of whether central bankers ought to tighten monetary policy preemptively in order to head off asset price misalignments before a sudden crash triggers financial instability. This study explores the issue of the appropriate monetary policy...

Full description

Saved in:
Bibliographic Details
Main Authors: CHOW, Hwee Kwan, CHOY, Keen Meng
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2009
Subjects:
Online Access:https://ink.library.smu.edu.sg/soe_research/1223
https://ink.library.smu.edu.sg/context/soe_research/article/2222/viewcontent/MonetaryPolicyandAssetPrices.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Singapore Management University
Language: English
id sg-smu-ink.soe_research-2222
record_format dspace
spelling sg-smu-ink.soe_research-22222019-04-21T01:50:41Z Monetary Policy and Asset Prices in a Small Open Economy: A Factor-Augmented VAR Analysis for Singapore CHOW, Hwee Kwan CHOY, Keen Meng The ongoing global financial turmoil has revived the question of whether central bankers ought to tighten monetary policy preemptively in order to head off asset price misalignments before a sudden crash triggers financial instability. This study explores the issue of the appropriate monetary policy response to asset price swings in the small open economy of Singapore. Empirical analysis of monetary policy based on standard VAR models, unfortunately, is often hindered by the use of sparse information sets. To better reflect the extensive information monitored by Singapore’s central bank, including global economic indicators, we augment a monetary VAR model with common factors extracted from a large panel dataset spanning 122 economic time series and the period 1980q1 to 2008q2. The resulting FAVAR model is used to assess the impact of monetary policy shocks on residential property and stock prices. Impulse response functions and variance decompositions suggest that monetary policy can potentially be used to lean against asset price booms in Singapore. 2009-10-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soe_research/1223 https://ink.library.smu.edu.sg/context/soe_research/article/2222/viewcontent/MonetaryPolicyandAssetPrices.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Economics eng Institutional Knowledge at Singapore Management University Monetary Policy Asset Prices Dynamic Factors Vector Autoregression Singapore Asian Studies Finance International Economics
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Monetary Policy
Asset Prices
Dynamic Factors
Vector Autoregression
Singapore
Asian Studies
Finance
International Economics
spellingShingle Monetary Policy
Asset Prices
Dynamic Factors
Vector Autoregression
Singapore
Asian Studies
Finance
International Economics
CHOW, Hwee Kwan
CHOY, Keen Meng
Monetary Policy and Asset Prices in a Small Open Economy: A Factor-Augmented VAR Analysis for Singapore
description The ongoing global financial turmoil has revived the question of whether central bankers ought to tighten monetary policy preemptively in order to head off asset price misalignments before a sudden crash triggers financial instability. This study explores the issue of the appropriate monetary policy response to asset price swings in the small open economy of Singapore. Empirical analysis of monetary policy based on standard VAR models, unfortunately, is often hindered by the use of sparse information sets. To better reflect the extensive information monitored by Singapore’s central bank, including global economic indicators, we augment a monetary VAR model with common factors extracted from a large panel dataset spanning 122 economic time series and the period 1980q1 to 2008q2. The resulting FAVAR model is used to assess the impact of monetary policy shocks on residential property and stock prices. Impulse response functions and variance decompositions suggest that monetary policy can potentially be used to lean against asset price booms in Singapore.
format text
author CHOW, Hwee Kwan
CHOY, Keen Meng
author_facet CHOW, Hwee Kwan
CHOY, Keen Meng
author_sort CHOW, Hwee Kwan
title Monetary Policy and Asset Prices in a Small Open Economy: A Factor-Augmented VAR Analysis for Singapore
title_short Monetary Policy and Asset Prices in a Small Open Economy: A Factor-Augmented VAR Analysis for Singapore
title_full Monetary Policy and Asset Prices in a Small Open Economy: A Factor-Augmented VAR Analysis for Singapore
title_fullStr Monetary Policy and Asset Prices in a Small Open Economy: A Factor-Augmented VAR Analysis for Singapore
title_full_unstemmed Monetary Policy and Asset Prices in a Small Open Economy: A Factor-Augmented VAR Analysis for Singapore
title_sort monetary policy and asset prices in a small open economy: a factor-augmented var analysis for singapore
publisher Institutional Knowledge at Singapore Management University
publishDate 2009
url https://ink.library.smu.edu.sg/soe_research/1223
https://ink.library.smu.edu.sg/context/soe_research/article/2222/viewcontent/MonetaryPolicyandAssetPrices.pdf
_version_ 1770570291533053952