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Demand for M3 and expenditure components in Malaysia: assessment from bounds testing approach

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  • Tuck Cheong Tang

Abstract

This study examines the effects of various demand components of real income on money demand, M3 for a small open developing Asian economy. The disaggregated components of real income are final consumption goods, expenditure on investment goods, and exports. Other determinants are domestic interest rate and exchange rate. Using Malaysian annual data over the period 1973-1998, the results of the 'bound' test based on Unrestricted Error-Correction Model estimation (Pesaran et al., 2001), indicates a long run equilibrium relationship between demand of real M3 and its determinants. The results also highlight that different domestic demand components yields different effects on money demand behaviour. The results have important policy implications.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 9 (2002)
Issue (Month): 11 ()
Pages: 721-725

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Handle: RePEc:taf:apeclt:v:9:y:2002:i:11:p:721-725

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Cited by:
  1. Muhammad Arshad Khan, 2007. "Foreign Direct Investment and Economic Growth: The Role of Domestic Financial Sector," PIDE-Working Papers 2007:18, Pakistan Institute of Development Economics.
  2. Silver, Steven D. & Verbrugge, Randal, 2010. "Home production and endogenous economic growth," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 297-312, August.
  3. Abdullah, Muhammad & Chani, Muhammad Irfan & Ali, Amjad, 2012. "Determinants of Money Demand in Pakistan: Disaggregated Expenditure Approach," MPRA Paper 50977, University Library of Munich, Germany, revised 2013.
  4. Paresh Kumar Narayan & Russell Smyth, 2003. "Attendance and pricing at sporting events: empirical results from Granger Causality Tests for the Melbourne Cup," Applied Economics, Taylor & Francis Journals, vol. 35(15), pages 1649-1657.
  5. Khan, Rana Ejaz Ali & Hye, Qazi Muhammad Adnan, 2011. "Financial Liberalization And Demand For Money: A Case of Pakistan," MPRA Paper 34795, University Library of Munich, Germany.
  6. James, Gregory A., 2005. "Money demand and financial liberalization in Indonesia," Journal of Asian Economics, Elsevier, vol. 16(5), pages 817-829, October.
  7. Tang, Tuck Cheong, 2004. "Demand for broad money and expenditure components in Japan: an empirical study," Japan and the World Economy, Elsevier, vol. 16(4), pages 487-502, December.
  8. Ansgar Belke & Thorsten Polleit, 2006. "Monetary policy and dividend growth in Germany: long-run structural modelling versus bounds testing approach," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1409-1423.
  9. Ferda HALICIOGLU & Mehmet UGUR, 2005. "On Stability of the Demand for Money in a Developing OECD," Macroeconomics 0508001, EconWPA.
  10. Ben Salha, Ousama & Jaidi, Zied, 2013. "Some new evidence on the determinants of money demand in developing countries – A case study of Tunisia," MPRA Paper 51788, University Library of Munich, Germany.
  11. P K Narayan & S Narayan, 2008. "Estimating the Demand for Money in an Unstable Open Economy: The Case of the Fiji Islands," Economic Issues Journal Articles, Economic Issues, vol. 13(1), pages 71-91, March.
  12. James Payne, 2003. "Post stabilization estimates of money demand in Croatia: error correction model using the bounds testing approach," Applied Economics, Taylor & Francis Journals, vol. 35(16), pages 1723-1727.
  13. goh, sookhoon, 2012. "Could inward FDI offset the substitution effect of outward FDI on domestic investment? evidence from Malaysia," MPRA Paper 43237, University Library of Munich, Germany.
  14. Lee Chew Ging & Ng Pek Kim, 2011. "The dynamics of divorce, income, and female labor force participation in Singapore," Economics Bulletin, AccessEcon, vol. 31(4), pages 2757-2768.
  15. Dahalan, Jauhari & Sharma, Subhash C. & Sylwester, Kevin, 2007. "Scale variable specification in a money demand function for Malaysia," Journal of Asian Economics, Elsevier, vol. 18(6), pages 867-882, December.

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