Spillovers from Global Monetary Conditions: Recent Experience and Policy Responses in Malaysia

12 Pages Posted: 7 Oct 2014

Date Written: August 2014

Abstract

As a result of growing financial integration, domestic financial conditions are increasingly influenced by global financial conditions. This phenomenon has intensified after the advanced economies implemented their unconventional monetary policies, which have led to a surge in global liquidity. Both push and pull factors have accelerated the flow of capital into emerging market economies. In regard to Malaysia, the first point of impact has been on the exchange rate. There have also been price and quantity effects in the financial markets and on balance sheets. The capital inflows, and their subsequent reversal, have raised concerns over the risks to macroeconomic and financial stability. Given that these risks were assessed to exist only in specific segments of the financial system and the economy, macroprudential measures have been implemented over the past few years to address potential areas of vulnerability. Going forward, although volatility of financial flows and markets is likely to continue, the Malaysian financial system is expected to weather this volatility and remain resilient.

Full publication: The Transmission of Unconventional Monetary Policy to the Emerging Markets

Keywords: Policy spillovers, capital flows management, macroprudential measures, Malaysia, monetary policy, financial imbalances

JEL Classification: E44, E58, F62, F32

Suggested Citation

Singh, Sukhdave, Spillovers from Global Monetary Conditions: Recent Experience and Policy Responses in Malaysia (August 2014). BIS Paper No. 78o, Available at SSRN: https://ssrn.com/abstract=2499830

Sukhdave Singh (Contact Author)

Central Bank of Malaysia

Jalan Dato' Onn
P.O. Box 10922
Kuala Lumpur, 50929
Malaysia

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