DECRG Kuala Lumpur Seminar Series: The Transmission of Financial Stress and its Interactions with Monetary Policy Responses in the ASEAN-5 Economies
September 1, 2016DECRG Kuala Lumpur Seminar Series

This study aims to analyze the determinants of financial stress, the impact of financial stress on the real economy and the interactions between monetary policy and financial stress in the ASEAN-5 economies. Results from a panel model of the determinants of financial stress indicates the significance of 3 global and regional variables - US financial stress, world GDP, regional financial contagion – and one domestic variable, bank credit, as important sources of financial stress. Through a subsequent SVAR analysis, financial stress is found to have adverse effects on the real economy, with large initial effects followed by a gradual dissipation. The results also suggest that the central banks in Malaysia, the Philippines and Thailand tend to lower their policy interest rates when financial stress increases. This leads to improvements in economic activity, albeit often with different time dynamics compared to the impact of financial stress on economic activity. Compared to financial stress, monetary policy shocks tend to affect output more gradually over longer lags. Lower policy interest rates are found to have a limited effect in alleviating financial stress, but can stimulate economic activity through other channels.

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  • Boon Hwa Tng is a Senior Economist at the Economics Department of Bank Negara Malaysia. Currently in charge of Research Advisory, his duties include undertaking specialized research to support the central bank’s policy mandates and overseeing research activities in the central bank. Since joining the central bank in 2011, he has published papers in journals and the central bank’s working paper series covering a wide range of topics. These include analysis on the heterogeneity of household spending behavior across the income distribution, interactions between household balance sheets and aggregate spending, the ASEAN economies’ exposures to external vulnerabilities, the measurement of financial stress and the role of monetary policy under financial stress. Boon Hwa was recently awarded the Young Malaysian Research Prize 2016 by the World Bank Development Research Group for his paper on "The Transmission of Financial Stress and its Interactions with Monetary Policy Responses in the ASEAN-5 Economies". He holds B.A. and M.A. degrees in Economics from the University of Western Ontario, and is currently a PhD candidate at University of Malaya.
Event Details
  • When: Thursday, September 1, 2016; 12:30 - 2:00 pm
  • WHERE: World Bank Malaysia Office, Level 3, Sasana Kijang, No. 2, Jalan Dato’ Onn
  • RSVP: Kindly RSVP by Tuesday, August 30, 2016.