A NORMATIVE APPROACH TO ECONOMIC UNCERTAINTY ESTIMATION

  • Pei-Tha Gan Universiti Pendidikan Sultan Idris
  • Siew-Yong Lim Universiti Pendidikan Sultan Idris
  • Han Yu Universiti Pendidikan Sultan Idris
  • Mohd Yahya Mohd Hussin Universiti Pendidikan Sultan Idris
  • Fidlizan Muhammad Universiti Pendidikan Sultan Idris
Keywords: Grid search, Optimal economic uncertainty, Islamic monetary policy

Abstract

A notable feature of the empirical studies on economic uncertainty index is that almost all published papers rely on the approximate form of economic uncertainty index, a method substantially used the variability measures, which is moving sample standarddeviation type. It can, therefore, not be ruled out for the refusal of economic uncertainty index precision is simply the outcome of a misspecification of a commonly used model and an elaborate data snooping process. In order to overcome these limitations, the paper considers the theoretical and practical that must be contented to construct the best economic uncertainty index, while considering Islamic rate as monetary policy instrument. Using the proposed grid search optimization procedure, the best economic uncertainty index anticipates that: (i) it can characterize the certainty of macroeconomic conditions in conformity with the expectation and (ii) it can serve as a guiding policy tool for improving certainty in macroeconomic conditions.

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Published
2019-03-06
How to Cite
Gan, P.-T., Lim, S.-Y., Yu, H., Mohd Hussin, M. Y., & Muhammad, F. (2019). A NORMATIVE APPROACH TO ECONOMIC UNCERTAINTY ESTIMATION. Journal of Contemporary Issues and Thought, 3, 156-165. Retrieved from https://ejournal.upsi.edu.my/index.php/JCIT/article/view/994