Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach

The main purpose of this study is to investigate the relevance of stock price and foreign opportunity cost variables to the money demand function in Malaysia using quarterly data over the period of 1982:1 to 1998:2 by employing recently developed econometric techniques of cointegration and error cor...

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Main Authors:	Mohd Zaini Abd Karim, Tang, Boon Guan
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 2004
Online Access:	http://journalarticle.ukm.my/171/ http://journalarticle.ukm.my/171/ http://journalarticle.ukm.my/171/1/1.pdf

id	ukm-171
recordtype	eprints
spelling	ukm-1712016-12-14T06:26:37Z http://journalarticle.ukm.my/171/ Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach Mohd Zaini Abd Karim, Tang, Boon Guan The main purpose of this study is to investigate the relevance of stock price and foreign opportunity cost variables to the money demand function in Malaysia using quarterly data over the period of 1982:1 to 1998:2 by employing recently developed econometric techniques of cointegration and error correction modeling. To take into account the effect of Asian Financial Crisis in mid 1997 on the behavior of the demand for money in Malaysia, the sample period is divided into two sub-samples: 1982:1 to 1996:4 and 1982:1 to 1998:2. The results provide evidence that the crisis somewhat affect the behavior of the money demand. The results of the study also show that the real money balances, real income, money’s own rate of return, the rate of return of alternative assets, stock prices, expected exchange rate depreciation and foreign interest rate are cointegrated suggesting the existence of a stable long run relationship among them in spite of the financial liberalization and innovation process that the Malaysian financial system has been experiencing. In addition, the results also indicate the dominance of wealth effect over substitution effect and the presence of currency substitution in Malaysia. Penerbit Universiti Kebangsaan Malaysia 2004 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/171/1/1.pdf Mohd Zaini Abd Karim, and Tang, Boon Guan (2004) Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach. Jurnal Ekonomi Malaysia, 38 . pp. 29-62. ISSN 0127-1962 http://www.ukm.my/penerbit
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	The main purpose of this study is to investigate the relevance of stock price and foreign opportunity cost variables to the money demand function in Malaysia using quarterly data over the period of 1982:1 to 1998:2 by employing recently developed econometric techniques of cointegration and error correction modeling. To take into account the effect of Asian Financial Crisis in mid 1997 on the behavior of the demand for money in Malaysia, the sample period is divided into two sub-samples: 1982:1 to 1996:4 and 1982:1 to 1998:2. The results provide evidence that the crisis somewhat affect the behavior of the money demand. The results of the study also show that the real money balances, real income, money’s own rate of return, the rate of return of alternative assets, stock prices, expected exchange rate depreciation and foreign interest rate are cointegrated suggesting the existence of a stable long run relationship among them in spite of the financial liberalization and innovation process that the Malaysian financial system has been experiencing. In addition, the results also indicate the dominance of wealth effect over substitution effect and the presence of currency substitution in Malaysia.
format	Article
author	Mohd Zaini Abd Karim, Tang, Boon Guan
spellingShingle	Mohd Zaini Abd Karim, Tang, Boon Guan Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach
author_facet	Mohd Zaini Abd Karim, Tang, Boon Guan
author_sort	Mohd Zaini Abd Karim,
title	Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach
title_short	Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach
title_full	Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach
title_fullStr	Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach
title_full_unstemmed	Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach
title_sort	stock prices, foreign opportunity cost, and money demand in malaysia: a cointegration and error correction model approach
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	2004
url	http://journalarticle.ukm.my/171/ http://journalarticle.ukm.my/171/ http://journalarticle.ukm.my/171/1/1.pdf
first_indexed	2023-09-18T19:01:20Z
last_indexed	2023-09-18T19:01:20Z
_version_	1777403093963505664

Stock prices, foreign opportunity cost, and money demand in Malaysia: a cointegration and error correction model approach

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