Author, Subjects, Keywords

Cited Author

 
 
   » By Author or Editor
 » Browse Author by Alphabet
 » By Journal
 » By Subjects
 » Malaysian Journals
 » By Type
 » By Year
 » By Latest Additions
 
 
   » By Author
 » Top 20 Authors
 » Top 20 Article
 » Top Journal Cited
 » Top Article Cited
 » Journal Citation Statistics
 » Usage Since Sept 2007


 
 
 

Login | Create Account

Stock Prices, Foreign Opportunity Cost, and Money Demand in Malaysia: A Cointegration and Error Correction Model Approach

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 01271962

[img]
Preview
PDF - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
553Kb

Official URL: http://pkukmweb.ukm.my/~penerbit/jurnal_pdf/ekon38_02.pdf

Affiliations

Universiti Utara Malaysia. Fakulti Ekonomi
Universiti Utara Malaysia. Fakulti Ekonomi

Abstract

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.
Tujuan utama kajian ini ialah untuk menyiasat kerelevanan harga stok
dan pembolehubah kos melepas asing dalam fungsi permintaan wang di
Malaysia dengan menggunakan teknik kointegrasi dan model pembetulan
ralat. Analisis dijalankan menggunakan data sukuan bagi jangkamasa
1982:1 hingga 1998:2. Bagi mengambilkira kesan krisis kawangan Asia
pada pertengahan tahun 1997 ke atas gelagat permintaan wang di Malaysia, sample data dibahagikan kepada dua jangkamasa; 1982:1 hingga
1996:4 dan 1982:1 hingga 1998:2. Hasil kajian menunjukkan krisis
kewangan mempunyai kesan keatas gelagat permintaan wang. Hasil
kajian juga menunjukkan baki benar, pendapatan benar, kadar pulangan
wang, kadar pulangan asset alternatif, harga stok, penurunan nilai kadar
tukaran asing dijangka, dan kadar faedah asing adalah berkointegrasi. Ini
menunjukkan keujudan hubungan jangka panjang yang stabil antara pembolehubah
tersebut walaupun sistem kewangan negara mengalami proses
liberalisasi dan inovasi. Di samping itu, hasil kajian juga menunjukkan
kesan pendapatan adalah lebih dominan berbanding kesan penggantian
dan keujudan penggantian matawang di Malaysia.

Item Type:Journal
Keywords:stock prices; foreign opportunity cost; money demand; cointegration, econometrics, Malaysia
Subjects:H Social Sciences, Economics, Sociology
ID Code:6050

Arize, A. C. 1994. A re-estimation of the demand for money in small developing economy. Applied Economics 26: 217-28.

Arize, A. C. & S. S. Shwiff. 1993. Cointegration, real exchange rate and modeling the demand for broad money in Japan. Applied Economics 25: 717-26.

Bahmani-Oskooee, M. & M. Pourheydarian. 1990. Exchange rate sensitivity of demand for broad money and effectiveness of fiscal and monetary policies. Applied Economics 22: 917-25.

Bahmani-Oskooee, M. & M. Malixi. 1991. Exchange rate sensitivity of the demand for money in developing countries. Applied Economics 23: 1377-84.

Bahmani-Oskooee, M., M. Martin & F. Niroomand. 1998. Exchange rate sensitivity of the demand for money in Spain. Applied Economics 30: 607-612.

Bank Negara Malaysia. Monthly Statistical Bulletin (various issues). Bank Negara Malaysia. Quarterly Statistical Bulletin (various issues).

Bank Negara Malaysia. 1994. Money and Banking in Malaysia. 35th Anniversary Edition, 1959-1994. Bank Negara Malaysia, Kuala Lumpur.

Bank Negara Malaysia. 1999. The Central Bank and the Financial System in Malaysia: a Decade of Change. Bank Negara Malaysia, Kuala Lumpur.

Choudhry, T. 1995. Long-run money demand function in Argentina during 1935-1962: evidence from cointegration and error correction models. Applied Economics 27: 661-67.

Chowdhury, A. R. 1997. The demand for money in a small open economy: the case of Switzerland. Open Economics Review 6: 131-44.

Eagle, R. F. & C. W. J. Granger. 1987. Cointegration and error correction: Representation, estimation and testing. Econometrica 55: 251-76.

Ericsson, N. R. 1998. Empirical modeling of money demand. Empirical Economics 23: 295-315.

Friedman, M. 1988. Money and the stock market. Journal of Political Economy 1-17.

Gurley, J. G. & E. S. Shaw. 1960. Money in a Theory of Finance. The Brooking Institution, Washington, D. C.

Hamzaid, Y. 1984. The Malaysian demand for money: further evidence. Jurnal Ekonomi Malaysia 9: 79-90.

International Monetary Fund. International Financial Statistics (various issues). Washington.

Johansen, J. 1988. Statistical analysis of cointegrating vectors. Journal of Economic Dynamics and Control 231-54.

Johansen, J. & K. Juselius. 1990. Maximum likelihood estimation and inference on cointegration with application to the demand for money. Oxford Bulletin of Economics and Statistics 52: 169-210.

Khalid, A. M. 1999. Modeling money demand in open economics: the case of selected Asian countries. Applied Economics 31: 1129-35.

Laidler, D. E. W. 1993. The Demand for Money Theories, Evidence and Problems. Fourth Edition, Harper Row, London.

Lenventakis, J. 1993. Modeling money demand in open economies over the modern floating rate period. Applied Economics 25: 1005-12.

Mansor, J. 1987. Inflationary expectation and the demand for money in moderate inflation: the Malaysian evidence. Jurnal Ekonomi Malaysia 15: 3-14.

Marashdeh, O. 1995. The effect of the exchange rate on the demand for financial assets in Malaysia. First Annual Asian Academic of Management Conference Proceedings. 7-8 December, Penang, Malaysia, 156-66.

Marashdeh, O. 1997. The demand for money in an open economy: The case of Malaysia, Paper presented at the Southern Finance Association Annual Meeting, 19-22 November, Baltimore, Maryland, USA.

Martin, M. G. & C. A. Winder Carlo. 1998. Wealth and the demand for money in the European Union. Empirical Economics 23: 507-24.

Michael, S. 1998. The stability of German money demand: not just a myth. Empirical Economics 23: 355-70.

Moghaddam, M. 1997. Financial innovations and the interest elasticity of money demand: evidence from an Error Correction Model. Atlantic Economic Journal June, 155-63.

Obben, J. 1998. The demand for money in Brunei. Asian Economic Journal 12:109-121.

Roslan, A.G. & S. H. Muzafar. 1987. Inflation rate and specification of Malaysian money demand function. The Malaysian Economic Review 24(2): 75-83.

Semudram, M. 1982. A macro-model of the Malaysian economy, 1957-1977. The Developing Economies.

Sriram, S. S. 2001. A survey of recent empirical money demand. IMF Staff Papers 47(3).

Tan, E. C. 1997. Money demand amid financial sector developments in Malaysia. Applied Economics 1201-15.

Thornton, J. 1998. Real stock prices and the long-run demand for money in Germany. Applied Financial Economics 513-17.

Repository Staff Only: item control page
 
 
 
 
 
 
© Copyright 2007 MyAIS Faculty of Computer Science and Information Technology, University of Malaya – All Rights Reserved. Malaysian Abstracting and Indexing System is powered by EPrints 3 which is developed by the School of Electronics and Computer Science at the University of Southampton. More information and software credits.