The Empirical Study Of Inflation In ASEAN-5

The inflation is an intricate economic phenomenon in macroeconomics that is inevitable for developing countries. Cyclical inflations not only cause serious economical destruction to the ASEAN economies, but also closely related to the occurrences of debt and financial crises. Ultimately, it may destroy years of economical achievements of many countries. Based on the empirical studies, this thesis investigates all the inflation cycles from 1961 to 2008 of ASEAN-5 countries, namely Indonesia, Malaysia, Philippines, Singapore and Thailand, trying to find out the deep conflicts of macro-economics behind the inflation phonomenon.In this thesis, we first examine the contribution rate of eleven non-monetary factors to the probability of inflation by using Pooled Probit model. Then, the influence of the government deficit to the form of inflation cycle is discussed. After that, the structural stability test with multiple regime shifts and Andrews' Sup-Wald test for a single structural break are employed to study inflation persistence and its structural shift. Furthermore, the correlativity between inflation dynamics and monetary policy regimes is examined. The reason for paying attention to the inflation is that it will cause great social welfare loss, especially when the hyperinflation happens. Thus, we estimate the welfare cost of inflation by consumer surplus approach, standard MIU model and cash-in-advance approach respectively. Moreover, the feasibility of the strategy adopted by the ASEAN-5 of stimulating the economy by moderate inflation is also investigated on the viewpoint of welfare.Beside the static approaches used previously, we also build a Structural Vector Auto-regression (SVAR) model, trying to dynamically simulate the relationships between inflation and other main macroeconomic parameters and monetary policy. Based on this, further discussions are made for anti-inflation policies and their effects, the coordination of interest rate policies and exchange rate policies, and the impact of central bank's independence to inflation management. All these works provide an academic foundation for the adjustment of monetary policy.The major contribution of this thesis is that we choose ASEAN-5 as a whole to study the reasons, properties, welfare loss and the correlations to monetary policy of inflation for the first time. Our work not only extends the researches of the ASEAN emerging market in china, but also gains many valuable references in fighting inflation. It is meaningful especially under the circumstance of the ever-increasing economic cooperation among China and ASEAN countries.