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Money demand and financial liberalization : revisting divisia money in Malaysia

Financial liberalization and innovation that have emerged in Malaysia since the late 1970s has been alleged to cause the breakdown in the previously stable money demand function,which in line has impeded the usefulness of monetary targeting based on simple-sum aggregation...

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Main Author: Lee, Wen Wen.
Format: Final Year Project Report
Language:English
Published: Universiti Malaysia Sarawak (UNIMAS) 2007
Subjects:
HG Finance
Online Access:http://ir.unimas.my/id/eprint/7068/3/Lee%20Wen%20Wen.pdf
http://ir.unimas.my/id/eprint/7068/
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spelling my.unimas.ir.70682024-01-02T07:10:49Z http://ir.unimas.my/id/eprint/7068/ Money demand and financial liberalization : revisting divisia money in Malaysia Lee, Wen Wen. HG Finance Financial liberalization and innovation that have emerged in Malaysia since the late 1970s has been alleged to cause the breakdown in the previously stable money demand function,which in line has impeded the usefulness of monetary targeting based on simple-sum aggregation method. Barnett (1980) proposed Divisia monetary aggregation as to contrast with the conventional simple-sum aggregation. Covering the period of 1981:Q1 to 2004:Q4, we reexamine the effects of financial liberalization and innovation on money demand functions, using the conventional simple-sum and Divisia monetary aggregates (of M1 and M2). Also, we test the relative performances these aggregates and investigate the relationship between money demand with income, interest rate and exchange rate. By applying cointegration, error-correction model and Granger - causality tests, results indicated that Divisia M2 has the best properties among all of the aggregates. Given its superiority theoretically and empirically, we strongly advocate the use of Divisia monetary aggregates in the course of monetary targeting, and subsequently, in the conduct of monetary policy. Universiti Malaysia Sarawak (UNIMAS) 2007 Final Year Project Report NonPeerReviewed text en http://ir.unimas.my/id/eprint/7068/3/Lee%20Wen%20Wen.pdf Lee, Wen Wen. (2007) Money demand and financial liberalization : revisting divisia money in Malaysia. [Final Year Project Report] (Unpublished)
institution Universiti Malaysia Sarawak
building Centre for Academic Information Services (CAIS)
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaysia Sarawak
content_source UNIMAS Institutional Repository
url_provider http://ir.unimas.my/
language English
topic HG Finance
spellingShingle HG Finance
Lee, Wen Wen.
Money demand and financial liberalization : revisting divisia money in Malaysia
description Financial liberalization and innovation that have emerged in Malaysia since the late 1970s has been alleged to cause the breakdown in the previously stable money demand function,which in line has impeded the usefulness of monetary targeting based on simple-sum aggregation method. Barnett (1980) proposed Divisia monetary aggregation as to contrast with the conventional simple-sum aggregation. Covering the period of 1981:Q1 to 2004:Q4, we reexamine the effects of financial liberalization and innovation on money demand functions, using the conventional simple-sum and Divisia monetary aggregates (of M1 and M2). Also, we test the relative performances these aggregates and investigate the relationship between money demand with income, interest rate and exchange rate. By applying cointegration, error-correction model and Granger - causality tests, results indicated that Divisia M2 has the best properties among all of the aggregates. Given its superiority theoretically and empirically, we strongly advocate the use of Divisia monetary aggregates in the course of monetary targeting, and subsequently, in the conduct of monetary policy.
format Final Year Project Report
author Lee, Wen Wen.
author_facet Lee, Wen Wen.
author_sort Lee, Wen Wen.
title Money demand and financial liberalization : revisting divisia money in Malaysia
title_short Money demand and financial liberalization : revisting divisia money in Malaysia
title_full Money demand and financial liberalization : revisting divisia money in Malaysia
title_fullStr Money demand and financial liberalization : revisting divisia money in Malaysia
title_full_unstemmed Money demand and financial liberalization : revisting divisia money in Malaysia
title_sort money demand and financial liberalization : revisting divisia money in malaysia
publisher Universiti Malaysia Sarawak (UNIMAS)
publishDate 2007
url http://ir.unimas.my/id/eprint/7068/3/Lee%20Wen%20Wen.pdf
http://ir.unimas.my/id/eprint/7068/
_version_ 1787140466893914112
score 13.211869

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