Stability of long-run money demand function : evidence from Malaysia

There has been extensive theoretical and empirical research on the subject of money demand. The usefulness of a money demand function in the conduct of monetary policy depends critically on its stability. This paper studies the stability of the M1 and M2 money demand functions for Malaysia. The resu...

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Main Author:	Abdul Manap, Turkhan Ali
Format:	Article
Language:	English
Published:	KENMS-IIUM Press 2009
Subjects:	HG201 Money
Online Access:	http://irep.iium.edu.my/7619/ http://irep.iium.edu.my/7619/ http://irep.iium.edu.my/7619/1/Stability_of_long-run_money_demand_function-_evidence_from_Malaysia.pdf

id	iium-7619
recordtype	eprints
spelling	iium-76192012-01-19T08:12:27Z http://irep.iium.edu.my/7619/ Stability of long-run money demand function : evidence from Malaysia Abdul Manap, Turkhan Ali HG201 Money There has been extensive theoretical and empirical research on the subject of money demand. The usefulness of a money demand function in the conduct of monetary policy depends critically on its stability. This paper studies the stability of the M1 and M2 money demand functions for Malaysia. The results show that both M1 and M2 are cointegrated with their determinants. However, only the long-run parameter of M1 demand function is stable over the sample period but not M2. The demand function for M2 becomes unstable after 1997, which coincides with the Asian financial crisis. This result contradicts that of Nair et al. (2008) who claim that the Asian financial crisis does not have any influence on the stability of money demand function in Malaysia. Our findings also mean that a simple relationship between M2, income and interest rate characterized by the standard model is not sufficient for analyzing the effects of Malaysian monetary policy. KENMS-IIUM Press 2009 Article PeerReviewed application/pdf en http://irep.iium.edu.my/7619/1/Stability_of_long-run_money_demand_function-_evidence_from_Malaysia.pdf Abdul Manap, Turkhan Ali (2009) Stability of long-run money demand function : evidence from Malaysia. IIUM Journal of Economics and Management, 17 (2). pp. 261-285. ISSN 1394-7680 http://www.iium.edu.my/enmjournal/
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG201 Money
spellingShingle	HG201 Money Abdul Manap, Turkhan Ali Stability of long-run money demand function : evidence from Malaysia
description	There has been extensive theoretical and empirical research on the subject of money demand. The usefulness of a money demand function in the conduct of monetary policy depends critically on its stability. This paper studies the stability of the M1 and M2 money demand functions for Malaysia. The results show that both M1 and M2 are cointegrated with their determinants. However, only the long-run parameter of M1 demand function is stable over the sample period but not M2. The demand function for M2 becomes unstable after 1997, which coincides with the Asian financial crisis. This result contradicts that of Nair et al. (2008) who claim that the Asian financial crisis does not have any influence on the stability of money demand function in Malaysia. Our findings also mean that a simple relationship between M2, income and interest rate characterized by the standard model is not sufficient for analyzing the effects of Malaysian monetary policy.
format	Article
author	Abdul Manap, Turkhan Ali
author_facet	Abdul Manap, Turkhan Ali
author_sort	Abdul Manap, Turkhan Ali
title	Stability of long-run money demand function : evidence from Malaysia
title_short	Stability of long-run money demand function : evidence from Malaysia
title_full	Stability of long-run money demand function : evidence from Malaysia
title_fullStr	Stability of long-run money demand function : evidence from Malaysia
title_full_unstemmed	Stability of long-run money demand function : evidence from Malaysia
title_sort	stability of long-run money demand function : evidence from malaysia
publisher	KENMS-IIUM Press
publishDate	2009
url	http://irep.iium.edu.my/7619/ http://irep.iium.edu.my/7619/ http://irep.iium.edu.my/7619/1/Stability_of_long-run_money_demand_function-_evidence_from_Malaysia.pdf
first_indexed	2023-09-18T20:17:05Z
last_indexed	2023-09-18T20:17:05Z
_version_	1777407860146176000

Stability of long-run money demand function : evidence from Malaysia

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