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The endogenous money hypothesis: empirical evidence from Malaysia (1985-2000)

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  • Bala Shanmugam
  • Mahendhiran Nair
  • Ong Wee Li

Abstract

This paper examines the endogenous money supply hypothesis in the Malaysian environment from 1985 to 2000. The results are consistent with the Post Keynesian hypothesis, whereby the money supply in Malaysia was endogenous over the study period. The empirical results also showed a long-run cointegrating relationship between money income and the M3 money supply in Malaysia. While this supports the liquidity preference approach, causality between the total bank loans and the M3 money supply may also support the accommodationist view. However, the results did not support the structuralist approach, nor did it show opposition to this approach.

Suggested Citation

  • Bala Shanmugam & Mahendhiran Nair & Ong Wee Li, 2003. "The endogenous money hypothesis: empirical evidence from Malaysia (1985-2000)," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(4), pages 599-611.
    • Handle: RePEc:mes:postke:v:25:y:2003:i:4:p:599-611
    DOI: 10.1080/01603477.2003.11051378
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    Cited by:

    1. Muhammad Omer & Omar Farooq Saqib, 2009. "Monetary Targeting in Pakistan: A Skeptical Note," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 5, pages 53-81.
    2. Oguzhan Cepni & Ibrahim Ethem Guney, 2017. "Endogeneity of Money Supply: Evidence from Turkey," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(1), pages 01-10, January.
    3. Badarudin, Z.E. & Ariff, M. & Khalid, A.M., 2013. "Post-Keynesian money endogeneity evidence in G-7 economies," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 146-162.
    4. Yulia Vymyatnina, 2013. "Money Supply and Monetary Policy in Russia: A Post-Keynesian Approach Revisited," EUSP Department of Economics Working Paper Series 2013/04, European University at St. Petersburg, Department of Economics.
    5. M. Lopreite, 2012. "The endogenous money hypothesis and securitization: the Euro area case (1999-2010)," Economics Department Working Papers 2012-EP02, Department of Economics, Parma University (Italy).
    6. Bozhechkova Alexandra & Trunin Pavel & Sinelnikova-Muryleva Elena & Petrova Diana & Chentsov Alexander, 2018. "Building of monetary and currency markets models," Research Paper Series, Gaidar Institute for Economic Policy, issue 175P, pages 1-96.
    7. Yulia Vymyatnina, 2013. "Money Supply and Monetary Policy in Russia: A Post-Keynesian Approach Revisited," EUSP Department of Economics Working Paper Series Ec-04/13, European University at St. Petersburg, Department of Economics.
    8. Meutia Safrina Rachma, 2010. "Endogeneity of Indonesian money supply," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 2(3), pages 277-288, April.
    9. Zulfiqar Hyder & Adil Mahboob, 2006. "Equilibrium Real Effective Exchange Rate and Exchange Rate Misalignment in Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 2, pages 237-263..
    10. Tas, Bedri Kamil Onur & Togay, Selahattin, 2012. "A direct test of the endogeneity of money: Implications for Gulf Cooperation Council (GCC) countries," Economic Modelling, Elsevier, vol. 29(3), pages 577-585.
    11. Louis-Philippe Rochon & Sergio Rossi, 2013. "Endogenous money: the evolutionary versus revolutionary views," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(2), pages 210-229, January.
    12. Rahimi , Azadeh, 2019. "The Endogenous or Exogenous Nature of Money Supply: Case of Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 14(1), pages 27-40, January.
    13. Tan, Anthony C.K. & Goh, Kim-Leng, 2009. "Financial Disintermediation in the 1990s : Implications on Monetary Policy in Malaysia," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 50(1), pages 1-27, June.
    14. Vymyatnina, Yulia, 2006. "How much control does Bank of Russia have over money supply?," Research in International Business and Finance, Elsevier, vol. 20(2), pages 131-144, June.

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