Has Financial Liberalization Reduced Liquidity Constraints in Malaysia? Some Empirical Results
AbstractOne of the important implications of financial liberalization is the reduction of liquidity constraints. The ability of households to borrow and adjust their financial portfolios has important implications for monetary aggregates and consequently, for the conduct of monetary policy. It is to be observed that the relationship between monetary aggregates and current income will be in a weakened state, in financially liberalized economies. The purpose of the present study is to investigate whether, financial liberalization has reduced liquidity constraints in Malaysia. To do this, an Euler equation has been estimated and an attempt has been made to determine whether, the estimates of l has been reduced in the deregulation era. The results suggest that the fraction of liquidity constrained consumers in Malaysia is quite substantial, and has, in fact, increased to more than 50% of the population in the 1980s-1990s. The study concludes that liquidity constraints have not been reduced as a result of financial liberalization in Malaysia. The important policy implication is that, fiscal policies such as, a temporary tax-cut or debt-finance fiscal spending, and the use of monetary aggregates as indicators of monetary policy can be effective in the presence of liquidity constraints.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by IUP Publications in its journal The IUP Journal of Monetary Economics.
Volume (Year): VII (2009)
Issue (Month): 1 (February)
Contact details of provider:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (G R K Murty).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.