The comments in the general discussion mainly focused on the specification of the financial conditions indexes (FCIs). Bhanupong Nidhiprabha expressed concern that the FCIs may not purely capture financial factors. He asked how the indexes changed when more variables were added and suggested testing the error terms to ensure that they are normally distributed. Chung Ming Kuan proposed including external indicators because they may be an important influence on domestic monetary policy—although the trade-off of including external indicators would be that they reduce the weight on domestic variables. He expected that the external and domestic indicators would be co-moving and an investigation into the factors or channels leading to the co-movements would be of interest. He also inquired what was “nonstandard” about the authors’ principal components analysis, to which the authors replied that the unbalanced panels required nonstandard principal components analysis.
Sung Chun Jung pointed to the high co-movements between...