Monetary policy shocks in Malaysia show negative impact on economy.
The article examines how changes in Malaysia's monetary policy affect different aspects of the economy. By using a method called Factor Augmented Vector Auto-regression (FAVAR), the researchers combined factor analysis and vector auto-regression to get a better understanding of the economy. They looked at 78 monthly time series from 2000 to 2010. The results show that the price puzzle effect is reduced with this approach, and financial and real variables react negatively to monetary policy changes, which aligns with economic theory.