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The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual realities and the future, potential, best possible conditions of general stable equilibrium which both pure and practical reason, exhaustive in the Kantian sense, show as being within the realm of potential realities beyond any doubt. The first classical revolution in economic thinking, included in factor “P” of the equation, conceived the economic and financial problems in terms of a model of ideal conditions of stable equilibrium but neglected the full consideration of the existing, actual conditions. That is the main reason why, in the end, it failed. The second modern revolution, included in factor “A” of the equation, conceived the economic and financial problems in terms of the existing, actual conditions, usually in disequilibrium or unstable equilibrium (in case of stagnation) and neglected the sense of right direction expressed in factor “P” or the realization of general, stable equilibrium. That is the main reason why the modern revolution failed in the past and is failing in front of our eyes in the present. The equation of unified knowledge, perceived as a sui generis synthesis between classical and modern thinking has been applied rigorously and systematically in writing the enclosed American‐British economic, monetary, financial and social stabilization plans. In the final analysis, a new economic philosophy, based on a synthesis between classical and modern thinking, called here the new economics of unified knowledge, is applied to solve the malaise of the twentieth century which resulted from a confusion between thinking in terms of stable equilibrium on the one hand and disequilibrium or unstable equilibrium on the other.

The paper aims to address how firms make strategic adjustment to the changing resource availability in different monetary policy conditions and how the stickiness of cost influences the strategic adjustment, and to dig out the major internal and industrial factors that influence the relationship between strategic change and monetary policy conditions.

The mechanism of how monetary policy affects strategic change is expounded by resource-based view and transaction cost theory. The balanced panel data of 422 companies of manufacturing industry listed in Chinese A share market before the end of 2003 from 2004-2013 are selected as sample to test the theoretic hypotheses.

It was found that looser monetary policy results in greater strategic change than the tighter one for the high adjustment cost. External capital dependence and industrial competition intensity strengthen the positive correlation between monetary policy condition and strategic change. Private firms are more susceptible to money supply condition change compared with state-owned enterprises. Companies tend to expand investment on fixed asset but to shrink investment on R & D and trademark in looser money supply condition.

Companies make bigger strategic adjustment in looser monetary policy condition for the greater availability of financial resources and lower market risk, but smaller adjustment in the tight one. However, owing to the sunk cost and the high adjustment cost, companies are not suggested to make aggressive strategic adjustment in the loose monetary conditions so as to avoid overcapacity and financial risk in tight monetary policy condition. For the policy-maker, as loose monetary policy cannot stimulate innovation but boost expansion on capacity, it is better to strengthen the resources configuration mechanism of monetary policy when making monetary policy.

This paper fulfils a theoretic gap to study the mechanism of how monetary policy influence corporate strategic resource reconfiguration via affecting the resource base of a company by combining resource-based view and transaction cost theory.

The purpose of the paper is to gauge the usefulness of the Monetary Condition Index (MCI) and Financial Condition Index (FCI) for the conduct of monetary policy in Malaysia.

The MCI is constructed as the weighted sum of changes in the exchange rate and interest rate from their levels in a chosen base year. The weights are obtained by summing up the coefficients on the lags variables from estimating the determinants of backward‐looking aggregate demand.

The paper finds that the movement inflation induces the movement in either interest rate or exchange rate. The result also indicates that the interest rate channel is found to be more powerful than the exchange rate channel. The method in determining the weights for each policy component of the index however indicates some degree of instability due to some external shock affected the exchange rate or the domestic short‐term interest rate.

In a small open economy with deregulated markets, it is crucial to assess the combined effect of interest rate and exchange rate on monetary conditions and the conduct of monetary policy. Despite the index ability to explain monetary conditions in Malaysia, the estimate of MCI and FCI should be used cautiously. The index does not offer a precise signal on the state of monetary condition in Malaysia.

This study aims to determine whether the transmission of monetary policy to the real economy depends on the structural conditions of financial stability. In particular, the paper shows that the effects of shocks to financial stability on output and inflation is conditional on the state of credit in the economy, measured broadly as a credit-to-GDP.

The authors use a threshold vector autoregression model with Bayesian techniques to investigate the impact of private nonfinancial sector credit on the dynamic relationship between financial conditions, monetary policy transmission mechanism and macroeconomic performance in Kazakhstan from 2005:Q1 to 2020:Q1.

In the modeled threshold vector autoregression (VAR) specification, the authors document that when the credit-to-GDP gap is low or the credit is below its trend, an increase to the interest rate leads to a short-term economic expansion. However, when the credit-to-GDP gap is high or the nonfinancial credit is above its trend, a tightening in monetary policy leads to an economic contraction with domestic financial conditions being weaker compared to a low credit environment.

The outcome is consistent with the related literature, which argues that a more sustained increase in credit is followed by a sharper economic contraction, but only when the economy is in the high credit state. These results highlight that financial stability measures (e.g. credit state) is important to take into account when conducting monetary policy in emerging economies.

The purpose of this paper is to appraise the effectiveness of monetary policy actions in variant market conditions for Islamic stocks. These stocks offer ground for a natural experiment as they have restrictions on the line of business and their distinguished capital structure does not allow them to combat the liquidity crisis through the use of leverage.

The paper uses the quantile regression approach for a multi-country sample of Islamic stock indices to assess the impact of domestic as well as US expansionary monetary policy on stock returns of Islamic indices at various locations of distribution of returns.

It is found that, at lower return levels, an expansionary monetary policy has a negative effect on the returns. In other cases, there is no significant impact of policy rate change on index returns.

It is more appropriate to use firm level data of Islamic stocks instead of stock indices. However, the information regarding index constituents is not publicly available.

The paper offers useful information to investors and policy makers. It shows that central banks should improve their credibility for monetary policy to be effective and their policies must be designed keeping in view the strong impact of US rate on global monetary environment.

This paper provides first empirical evidence of the impact of discount rates on the returns of Islamic stocks in different market conditions.

The purpose of this paper is to summarize different methods of constructing the financial conditions index (FCI) and analyze current studies on constructing FCI for China. Due to shifts of China’s financial mechanisms in the post-crisis era, conventional ways of FCI construction have their limitations.

The paper suggests improvements in two aspects, i.e. using time-varying weights and introducing non-financial variables. In the empirical study, the author first develops an FCI with fixed weights for comparison, constructs a post-crisis FCI based on time-varying parameter vector autoregressive model and finally examines the FCI with time-varying weights concerning its explanatory and predictive power for inflation.

Results suggest that the FCI with time-varying weights performs better than one with fixed weights and the former better reflects China’s financial conditions. Furthermore, introduction of credit availability improves the FCI.

FCI constructed in this paper goes ahead of inflation by about 11 months, and it has strong explanatory and predictive power for inflation. Constructing an appropriate FCI is important for improving the effectiveness and predictive power of the post-crisis monetary policy and foe achieving both economic and financial stability.

Using quarterly data for a sample of 17 industrial countries, the purpose of this paper is to study asymmetry in the face of monetary shocks compared to government spending shocks.

The paper outlines demand and supply channels determining the asymmetric effects of monetary and fiscal policies. The time‐series model is presented and an analysis of the difference in the asymmetric effects of monetary and fiscal shocks within countries is presented. There then follows an investigation of the relevance of demand and supply conditions to the asymmetric effects of monetary and fiscal shocks. The implications of asymmetry are contrasted across countries.

Fluctuations in real output growth, price inflation, wage inflation, and real wage growth vary with respect to anticipated and unanticipated shifts to the money supply, government spending, and the energy price. The asymmetric flexibility of prices appears a major factor in differentiating the expansionary and contractionary effects of fiscal and monetary shocks. Higher price inflation, relative to deflation, exacerbates output contraction, relative to expansion, in the face of monetary shocks. In contrast, larger price deflation, relative to inflation, moderates output contraction, relative to expansion in the face of government spending shocks. The growth of output and the real wage decreases, on average, in the face of monetary variability in many countries. Moreover, the growth of real output and the real wage increases, on average, in the face of government spending variability in many countries. Asymmetry differentiates the effects of monetary and government spending shocks within and across countries. The degree and direction of asymmetry provide a new dimension to differentiate between monetary and fiscal tools in the design of stabilization policies.

The paper's evidence sheds light on the validity of theoretical models explaining asymmetry in the effects of demand‐side stabilization policies. Moreover, the evidence should alert policy makers to the need to relax structural and institutional constraints to maximize the benefits of stabilization policies and minimize the adverse effects on economic variables.

The purpose of this paper is to analyze security-market returns relative to the political party of the president, the Federal Reserve’s monetary policy, the year of the president’s term, and the state of political gridlock. Contrary to prior studies, which evaluated the influences separately, the authors jointly evaluate these variables.

The analysis supports the notion that security returns are significantly related to shifts in Fed monetary policy, political gridlock, and the year of the presidential term; however, returns are generally invariant to the president’s political party affiliation. Overall, the findings suggest that investors should focus less attention on the party of the president and instead more closely monitor Fed actions.

It appears that political harmony should be welcomed by equity investors, but not debt investors. Finally, regardless of the political outcome, if the past serves as a guide, investors may have to wait until year three of the next presidential term to enjoy the fruits of the current political season.

The academic literature is rich with studies that consider the aforementioned political effects and the influence that monetary policy have on the markets. To date, however, these factors have not been jointly considered when examining returns. This paper considers several dimensions of the political landscape – the party of the president, the presence or absence of political gridlock, and the presidential term cycle effect – in conjunction with Fed monetary policy in examining long-term security returns. By examining the relationship between security returns and both political and monetary conditions, the authors provide robust evidence regarding the relationships.