IDEAS home Printed from https://ideas.repec.org/a/icf/icfjae/v05y2006i6p17-27.html
   My bibliography  Save this article

Money Demand In Malaysia: Further Empirical Evidence

Author

Listed:
  • Huzaimi Hussain
  • Venus Khim Sen Liew

Abstract

Cointegration, error correction models and CUSUM stability test have been employed in this study to analyze the money demand in Malaysia with relation to its determinants, namely, real income level, real interest rate, nominal exchange rate, and the degree of monetization. Using Malaysian monthly data covering 1979 M1 to 2002 M5, the authors find a cointegration relationship between M1 as well as M2, and their determinants. CUSUM stability test shows that both M1 and M2 are stable in this sample period, in spite of the financial innovations, liberalization and the Asian financial crisis. A key contribution of this study is the inclusion of the degree of monetization variable, which is found to be playing a significant role in the cointegrating equation. Earlier studies that found no cointegration between money demand and its determinants in Malaysia rendering Bank Negara Malaysia to shift its monetary targeting to interest rate targeting may be due to the omission of the degree of monetization variable. Hence, this finding suggests that M1 and M2 can be effective monetary targeting tools in the implementiation of monetary policy.

Suggested Citation

  • Huzaimi Hussain & Venus Khim Sen Liew, 2006. "Money Demand In Malaysia: Further Empirical Evidence," The IUP Journal of Applied Economics, IUP Publications, vol. 0(6), pages 17-27, November.
  • Handle: RePEc:icf:icfjae:v:05:y:2006:i:6:p:17-27
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below 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.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:icf:icfjae:v:05:y:2006:i:6:p:17-27. See general 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). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.