Effectives of Monetary Policy Under the High and Low Economic Uncertainty States: Evidence from the Major Asian Economies

32 Pages Posted: 12 Jun 2021

See all articles by Mehmet Balcilar

Mehmet Balcilar

Eastern Mediterranean University

Zeynel Abidin Ozdemir

IZA Institute of Labor Economics; Economic Research Forum (ERF)

Huseyin Ozdemir

Gazi University

Gurcan Aygun

Gazi University

Mark E. Wohar

University of Nebraska at Omaha

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Abstract

This study examines the monetary policy effectiveness of five major Asian countries (China, Hong Kong, India, Japan, and South Korea) using a quantile vector autoregression (QVAR) model-based spillover estimation approach of Balcilar et al. (2020b) at different quantile paths. To do this, we first obtain the spillover index from interest rate to industrial production and consumer price index under the high and low levels of uncertainty. The full sample results from our analysis provide partial supporting evidence for the economic theory, which asserts that monetary policy efficiency must fall during periods of high economic uncertainty. Furthermore, this approach also allows us to uncover asymmetric effects of economic policy uncertainty and lending rate on macroeconomic indicators. The impacts of interest rate and domestic and foreign (US, EU) uncertainty shocks on major Asian markets present significant asymmetric characteristics. Moreover, our time-varying results suggest that monetary policy shocks are more effective and potent on Asian economies during very low and very high uncertain times than normal economic periods.

JEL Classification: C32, E44, F42, G01

Suggested Citation

Balcilar, Mehmet and Ozdemir, Zeynel Abidin and Ozdemir, Huseyin and Aygun, Gurcan and Wohar, Mark E., Effectives of Monetary Policy Under the High and Low Economic Uncertainty States: Evidence from the Major Asian Economies. IZA Discussion Paper No. 14420, Available at SSRN: https://ssrn.com/abstract=3865445

Mehmet Balcilar (Contact Author)

Eastern Mediterranean University ( email )

Gazimagusa
Turkey

HOME PAGE: http://www.mbalcilar.net

Zeynel Abidin Ozdemir

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Economic Research Forum (ERF) ( email )

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Dokki, Cairo
Egypt

Huseyin Ozdemir

Gazi University ( email )

Teknikokullar Ankara, 06500
Turkey

Gurcan Aygun

Gazi University ( email )

Teknikokullar Ankara, 06500
Turkey

Mark E. Wohar

University of Nebraska at Omaha ( email )

Department of Economics
6708 Pine Street MH 332S
Omaha, NE 68182
United States
402-554-3712 (Phone)
402-554-2853 (Fax)

HOME PAGE: http://cba.unomaha.edu/faculty/mwohar/WEB/homepage.html

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