The effect of financial deregulation on money demand in Malaysia
The study seeks to examine the impact of financial deregulation on the money demand in Malaysia and the implication of altered money demand pattern on the Malaysian monetary conduct. It also attempts to investigate the currency substitution effect as result of the financial market development and integration of domestic market with the rest of the world. The study utilizes Augmented Dickey Fuller (ADF) and Phillips Perron (PP) tests for unit root and stationarity of data, multivariate Johansen cointegration test, and Vector Error Correction model in the analysis of the dynamics of the short run money demand model and adjustment to restore its long run equilibrium. Findings suggest a stable long run relationship of money demand in Malaysia and a greater income elasticity of money demand supported by growing degree of monetization and substantial improvement in banking infrastructure as well as some degree of currency substitution among domestic residents. However, short run dynamic of money demand is found to be instable and correction of its disequilibrium over time was somehow slow, hence shifting monetary targeting by authority from monetary aggregates towards interest rates.
|Date of creation:||04 Jun 2008|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Engle, Robert F & Granger, Clive W J, 1987.
"Co-integration and Error Correction: Representation, Estimation, and Testing,"
Econometric Society, vol. 55(2), pages 251-76, March.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Dekle, Robert & Pradhan, Mahmood, 1999. "Financial Liberalization and Money Demand in the ASEAN Countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(3), pages 205-15, July.
- Muhd-Zulkhibri Abdul Majid, 2004. "Reassessing The Stability of Broad Money Demand in Malaysia," Macroeconomics 0405020, EconWPA.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:42295. 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: (Joachim Winter)
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.