Effectiveness of the Monetary Transmission Mechanism in Achieving the Ultimate Goals of ASEAN-3

Abstract

This study was intended to find out which channels (exchange rates, interest rates, credit and money) have the most significant effect on price stability and economic growth during 1997 Q1-2017 Q4 using the Vector Error Correction Model (VECM). Based on the estimation, Interest Rate and Exchange Rate were the most influencing channels, while in Malaysia were the Exchange Rate and Credit. In the Philippines, Credit and Interest Rate were relatively effective. In addition, in the countries, the monetary policies they applied had a significant correlation with two economic variables: inflation and economic growth.