Authors : Tan Juat Hong
Abstract: The study investigates the stability of demand for money in Malaysia by using a cointegration and CUSUM approach. Monthly time series data (1996-2014) encompassing monetary aggregates M1, M2, interest rate and a scale variable represented by the Industrial Production Index (IPI) are used in the regression. The results show a long-run cointegrating relationship between the real money demand for money (both monetary aggregates), real output and interest rate. The money demand functions as revealed by CUSUM and CUSUMSQ statistical tests are relatively stable for the period studied. Empirical evidence would suggest that monetary policy decisions are effective in the broad economic objectives of Malaysia.
Tan Juat Hong , 2016. The Stability of Demand for Money in Malaysia: A Cointegration And CUSUM Approach. International Business Management, 10: 4107-4112.