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1 – 1 of 1Hail Park, Jong Chil Son and Wenbo Wang
This study empirically aims to analyze the transmission of monetary policy in consideration of asymmetry based on the Bank of the Lao PDR (BOL)'s monetary policy tools and real…
Abstract
Purpose
This study empirically aims to analyze the transmission of monetary policy in consideration of asymmetry based on the Bank of the Lao PDR (BOL)'s monetary policy tools and real and financial variables in the domestic market.
Design/methodology/approach
This study adopts two approaches, conventional vector autoregression (VAR) and asymmetric VAR, to investigate the impact of monetary policy on macroeconomic variables including inflation and real GDP growth in the Lao PDR.
Findings
Under a highly dollarized monetary regime, the policy rate change plays a weaker role compared with M0, which exerts significantly positive effects on real GDP growth and inflation. The results of the asymmetric VAR model further substantiate that the real economy responds to a positive M0 shock (easing monetary policy) rather than a negative shock (tightening monetary policy).
Practical implications
Overall estimation results suggest that the effectiveness of monetary policy is limited in Laos, which would take priority over efforts to strengthen the development of the short-term financial market and de-dollarization.
Originality/value
This study can fill the gap in the literature in which the discussions on the transmission mechanism of monetary policy in the BOL's monetary policy are still little known.
Details