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Can Inflation be Claimed as a Monetary Phenomenon? The Malaysian Experience

Author

Listed:
  • Chor Foon Tang

    (Centre for Policy Research and International Studies, Universiti Sains Malaysia, 11800 USM, Penang, Malaysia,)

  • Ilhan Ozturk

    (Faculty of Economics and Administrative Sciences, Cag University, 33800 Mersin, Turkey)

Abstract

The purpose of this study is to empirically re-investigate the money-prices nexus for Malaysia through the cointegration and causality techniques. This study covered the monthly data from 1971:M1-2014:M8. The Maki multiple breaks cointegration test suggests that the variables are cointegrated. Furthermore, the MWALD test shows a unidirectional causal relationship run from money supply (M2) to aggregate prices, meaning that only the monetarist's view exist in the Malaysian economy. However, the time-varying causality tests indicate that inflation is not always a monetary phenomenon in Malaysia. Therefore, the contractionary monetary policy may not an effective instrument in managing inflationary behaviour in Malaysia.

Suggested Citation

  • Chor Foon Tang & Ilhan Ozturk, 2017. "Can Inflation be Claimed as a Monetary Phenomenon? The Malaysian Experience," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 453-460.
    • Handle: RePEc:eco:journ1:2017-03-59
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    References listed on IDEAS

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    More about this item

    Keywords

    Cointegration; Inflation; Money; Recursive Regression; Rolling Regression;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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