Money Balances, Economic Activities and Selective Capital Controls in Malaysia

Authors

  • Che Ani Mad Universiti Utara Malaysia, Malaysia

DOI:

https://doi.org/10.32890/ijbf2005.3.5

Keywords:

Money demand, portfolio funds, interest rates, narrow money, short- and long-run effects, monetary regulation

Abstract

This paper reports results of a test of money demand and supply as predicted by recent studies applied to small economies with greater openness to external factors. These results suggest that the short- and long-run money balances are determined by both the interest rate policies as well as the price levels in the economy. With open conditions generally prevailing in our tested small economy, increases in interest rates attract portfolio funds, which helped to spur asset price bubble to build up. When the economy came under strain as a result, the bubble bursts as happened at the time of the Asian financial crisis, which led to a severe currency crisis that lasted for about 18 months, causing severe economic downturns thereafter. The findings may be taken to mean that control of short-run portfolio flow is critical in a more open small economy.

 

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Published

03-01-2006

Issue

Vol. 3 (2005): Special Issue Vol. 3, 2005

Section

Articles

How to Cite

Mad, C. A. (2006). Money Balances, Economic Activities and Selective Capital Controls in Malaysia. International Journal of Banking and Finance, 3, 73-82. https://doi.org/10.32890/ijbf2005.3.5

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Harvested 2026-09-07
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Identifiers DOI 10.32890/ijbf2005.3.5 OpenAlex W1506769878