Reassessing The Stability of Broad Money Demand in Malaysia

Muhamed Zulkhibri Abdul Majid ()

Macroeconomics from EconWPA

Abstract: This paper re-examines the money demand in Malaysia covering the period from 1974 to 2001, a period characterised by various events particularly the financial sector liberalisation, changes in monetary framework and currency crises. Our results support the existence of fairly stable long-run money demand function despite the various changes and developments in the economy. However, there is an evidence of instability in short-run money demand. On this ground, the monetary targeting framework in Malaysia seems to be appropriate at least in the 1990s and monetary aggregate continue to be a useful longer-term indicator in the formulation of monetary policy.

Keywords: money demand; cointegration; error-correction; Malaysia (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-sea
Date: 2004-05-19
Note: Type of Document - pdf; pages: 30
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0405020

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