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The Malaysian Balance of Payments:Keynesian Approach Versus Monetary Approach

Author

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  • Jarita Duasa

Abstract

There are two competing theories of balance of payments: the Keynesian and the monetary theories. Each of the two approaches provides distinct explanations on how the determinants of the balance of payments could lead to equilibrium and disequilibrium of the balance of payments account and both theories also rank differently the importance of real/merchandise account and monetary/official reserve transactions balance account of the balance of payments. The paper aims to examine the two theories on Malaysian balance of payments based on two tests: test of correctness of signs of regressors and test of speed adjustment. The results show that signs of regressors of the Trade Balance (TB) equation support the Keynesian view while signs of regressors of the Official Reserve Transactions Balance (ORTB) equation support both Keynesian and Monetary views. It is also found that the ORTB dominates the TB in terms of quickness of adjustment, so the ORTB is an autonomous account and the TB is an accommodating accoun

Suggested Citation

  • Jarita Duasa, 2004. "The Malaysian Balance of Payments:Keynesian Approach Versus Monetary Approach," Computing in Economics and Finance 2004 26, Society for Computational Economics.
    • Handle: RePEc:sce:scecf4:26
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    File URL: http://repec.org/sce2004/up.20550.1075841570.pdf
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    References listed on IDEAS

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    1. Rich, Georg, 1990. "Exchange-rate management under floating exchange rates : A skeptical Swiss view," Journal of Banking & Finance, Elsevier, vol. 14(5), pages 993-1021, November.
    2. Ramaprasad Bhar & A. G. Malliaris, 2015. "Volume and Volatility in Foreign Currency Futures Markets," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 5, pages 103-123, World Scientific Publishing Co. Pte. Ltd..
    3. Boadway, R. & Flatters, F., 1991. "Malaysia's Balance of Payments: What is the Problem? How Serious is It?," Papers 2, Malysian Institute of Economic Research-.
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    Cited by:

    1. Vacu, Nomfudo P. & Odhiambo, Nicholas M., 2020. "The Determinants of Import Demand in South Africa: An Empirical Investigation," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(1), pages 51-76.

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    More about this item

    Keywords

    Keynesian theory; Monetary theory; Trade Balance; Official Reserves Transaction Balance.;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E0 - Macroeconomics and Monetary Economics - - General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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