Determining the effectiveness of monetary policy tools towards economic growth; a case study in Malaysia during recession (1998-2005) / Nur Hafidzah Idris

The purpose of this study is to determine the most effective tool of Monetary Policy to build up economic growth during recession. The tools are Open Market Operation (OMO), Statutory Reserve Requirement (SRR) and Discount Rate (DR). Malaysians Government Securities Bond (MGS) as a proxy to OMO, 3-month intervention rate is used for discount rate and Growth Domestic Product (GDP) as a proxy to economic growth. The scope of the study is during recession, period starting from January 1998 to December 2005. The data is collected monthly, apart from that, secondary sources are also used. From the result, only the discount rate has a significant relationship with GDP, while there is no significant relationship between open market operation and statutory reserve requirement to GDP. Thus, discount rate is the most effective tool for economic growth during recession. Since the researcher had identified the most effective tool for Monetary Policy during recession, it is recommend for BNM to use and emphasize these effective tools (discount rate) in our economy during recession.