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Full-Text Articles in Social and Behavioral Sciences
Monetary Policy And Asset Prices In A Small Open Economy: A Factor-Augmented Var Analysis For Singapore, Hwee Kwan Chow, Keen Meng Choy
Monetary Policy And Asset Prices In A Small Open Economy: A Factor-Augmented Var Analysis For Singapore, Hwee Kwan Chow, Keen Meng Choy
Research Collection School Of Economics
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 …
Analyzing And Forecasting Business Cycles In A Small Open Economy: A Dynamic Factor Model For Singapore, Hwee Kwan Chow, Keen Meng Choy
Analyzing And Forecasting Business Cycles In A Small Open Economy: A Dynamic Factor Model For Singapore, Hwee Kwan Chow, Keen Meng Choy
Research Collection School Of Economics
A dynamic factor model is applied to a large panel dataset of Singapore’s macroeconomic variables and global economic indicators with the initial objective of analyzing business cycles in a small open economy. The empirical results suggest that four common factors are present in the quarterly time series, which can broadly be interpreted as world, regional, electronics and domestic economic cycles. The estimated factor model explains well the observed fluctuations in real economic activity and price inflation, leading us to use it in forecasting Singapore’s business cycles. We find that the forecasts generated by the factors are generally more accurate than …