Money Demand in Malaysia: Further Empirical Evidence
A cointegration, error correction models and CUSUM stability test are employed in this study aimed at analyzing the money demand in Malaysia with relations to its determinants namely real income level, real interest rate, nominal exchange rate and the degree of monetization. Using Malaysian monthly...
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| Format: | Article |
| Language: | English |
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IUP Publications
2006
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| Online Access: | http://ir.unimas.my/id/eprint/18642/ http://ir.unimas.my/id/eprint/18642/8/Money%20Demand%20in%20Malaysia%20%28abstract%29.pdf |
| _version_ | 1848838556072542208 |
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| author | Huzaimi, Hussain Liew, Venus Khim-Sen |
| author_facet | Huzaimi, Hussain Liew, Venus Khim-Sen |
| author_sort | Huzaimi, Hussain |
| building | UNIMAS Institutional Repository |
| collection | Online Access |
| description | A cointegration, error correction models and CUSUM stability test are employed in this study aimed at analyzing the money demand in Malaysia with relations to its determinants namely real income level, real interest rate, nominal exchange rate and the degree of monetization. Using Malaysian monthly data covering 1979M1 to 2002M5 we are able to find cointegration relationships among M1 as well as M2 and their determinants. CUSUM stability test shows that both M1 and M2 are stable in this sample period albeit the Financial Innovations and Liberalization and also Asia Financial Crisis. A key contribution of this study is the inclusion of the degree of monetization variable, which is found playing a the 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 implementing monetary policy. |
| first_indexed | 2025-11-15T06:57:26Z |
| format | Article |
| id | unimas-18642 |
| institution | Universiti Malaysia Sarawak |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T06:57:26Z |
| publishDate | 2006 |
| publisher | IUP Publications |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | unimas-186422017-11-21T01:05:17Z http://ir.unimas.my/id/eprint/18642/ Money Demand in Malaysia: Further Empirical Evidence Huzaimi, Hussain Liew, Venus Khim-Sen HB Economic Theory A cointegration, error correction models and CUSUM stability test are employed in this study aimed at analyzing the money demand in Malaysia with relations to its determinants namely real income level, real interest rate, nominal exchange rate and the degree of monetization. Using Malaysian monthly data covering 1979M1 to 2002M5 we are able to find cointegration relationships among M1 as well as M2 and their determinants. CUSUM stability test shows that both M1 and M2 are stable in this sample period albeit the Financial Innovations and Liberalization and also Asia Financial Crisis. A key contribution of this study is the inclusion of the degree of monetization variable, which is found playing a the 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 implementing monetary policy. IUP Publications 2006-01 Article PeerReviewed text en http://ir.unimas.my/id/eprint/18642/8/Money%20Demand%20in%20Malaysia%20%28abstract%29.pdf Huzaimi, Hussain and Liew, Venus Khim-Sen (2006) Money Demand in Malaysia: Further Empirical Evidence. The IUP Journal of Applied Economics, 6. pp. 17-27. ISSN 0972-6861 https://www.researchgate.net/publication/5105058 |
| spellingShingle | HB Economic Theory Huzaimi, Hussain Liew, Venus Khim-Sen Money Demand in Malaysia: Further Empirical Evidence |
| title | Money Demand in Malaysia: Further Empirical Evidence |
| title_full | Money Demand in Malaysia: Further Empirical Evidence |
| title_fullStr | Money Demand in Malaysia: Further Empirical Evidence |
| title_full_unstemmed | Money Demand in Malaysia: Further Empirical Evidence |
| title_short | Money Demand in Malaysia: Further Empirical Evidence |
| title_sort | money demand in malaysia: further empirical evidence |
| topic | HB Economic Theory |
| url | http://ir.unimas.my/id/eprint/18642/ http://ir.unimas.my/id/eprint/18642/ http://ir.unimas.my/id/eprint/18642/8/Money%20Demand%20in%20Malaysia%20%28abstract%29.pdf |