The international transmission of volatility shocks on an emerging economy: the case of Malaysia

Murdipi, Rafiqa and Shah, Said Zamin and Baharumshah, Ahmad Zubaidi and Said, Rusmawati (2019) The international transmission of volatility shocks on an emerging economy: the case of Malaysia. Malaysian Journal of Economic Studies, 56 (2). pp. 243-265. ISSN 1511-4554

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Abstract

This study examines the effects of global economic policy uncertainty (EPU) on Malaysia’s macroeconomic indicators. Three substantive findings emerged from our inquiry based on a multivariate generalized autoregressive conditional heteroscedasticity (GARCH) model: (1) Domestic uncertainty – in nominal and real terms – seems to have no material impact on the macro-economy after controlling for global uncertainty. (2) Fluctuations in the global EPU are more important than domestic uncertainty in predicting a country’s macroeconomic variables, particularly output and CPI-based inflation. The macroeconomic variables carry signs as per theoretical expectation. (3) The model predicts that external shocks exhibit a much larger impact on macroeconomic variables than those shocks originating from domestic markets. The results have deepened our insight on how the real variables correlate with external uncertainties and the fitful recovery in the recent past.

Item Type:	Article (Journal)
Additional Information:	9686/87403
Uncontrolled Keywords:	Economic policy uncertainty, output growth, inflation, multivariate GARCH
Subjects:	H Social Sciences > HB Economic Theory > HB3711 Business cycles. Economic fluctuations
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Economics and Management Sciences > Department of Finance
Depositing User:	Dr. - Murdipi
Date Deposited:	08 Jan 2021 22:01
Last Modified:	08 Jan 2021 22:08
URI:	http://irep.iium.edu.my/id/eprint/87403

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