Given that rainfall is externally provided by nature and that it is also correlated with rural income, rainfall shocks seem to be the perfect instrument, as adopted in a popular interpretation of Paxson (1992). However, there are two problems with this reinterpretation: weak instruments and...

This paper looks at the implications of uncertainty in potential output estimation for the conduct of monetary policy. Our findings of potential output and the output gap for Thailand are based on commonly used methods such as the Hodrick-Prescott filter and unobserved component models....

This paper offers a justification for and assurance of the efficiency of a monetary policy design that is based on using core inflation as the policy target. Illustrated in a New Keynesian framework where the microeconomic foundation with rigidities of various types is the central feature, the...

This paper presents the Bank of Thailand’s new model based on the dynamic stochastic general equilibrium (DSGE) paradigm. The paper details the model structure of a small open economy, model parameterization, and model properties. The purpose of this DSGE model is to provide a coherent...

This paper illustrates that ?nancial conditions are not simply a re?ection of macroeconomic developments. In fact, one feeds the other, and both are mutually dependent. Adverse ?nancial conditions have the potential to exacerbate negative disturbances on the real economy| converting the initial...

This paper examines the role of financial integration in promoting growth and stability in East Asia. It first examines the degree of financial integration and finds that East Asia is more integrated with the developed markets than with regional markets. It then proceeds to investigate the...

This paper first documents the recent changing landscape of Thailand's financial sector, noting in particular the decline in bank credit intensity of production. It discusses the reasons behind the observed trend of bank disintermediation and analyzes whether these factors are likely to persist...

This paper attempts to conceptualize the debate regarding the role of asset prices and perceived financial imbalances in the formation of monetary policy from the perspective of theoretically optimal policy responses. While much of the disagreement can be reconciled within the framework of...

This paper aims to outline the role that effective exchange rates, both real and nominal, play in Thailand’s monetary policy framework. It discusses some of the applications that effective exchange rates have been applied to in practice, highlighting some of the limitations that often arise....