The Uncertainty of the U.S. and Japanese Interest Rates and Its Effect on Money Demand in Malaysia

Authors

  • Jauhari Dahalan Faculty of Economics Universiti Utara Malaysia, Malaysia

DOI:

https://doi.org/10.32890/ijms2004.11.1.5

Keywords:

money demand, GARCH, conditional variance, volatility, user cost, unit root, VAR, cointegration

Abstract

This paper examines the effect of the volatility of the U.S. and Japanese interest rates on the money demand in Malaysia. The volatility of the U.S. and Japanese interest rates measured as a conditional variance are estimated from the GARCH(1,I) model. The long-term relationship between real money demand in Malaysia and the volatility of the U.S., and between real money demand in Malaysia and Japanese interest rates are investigated by applying the Johansen multivariate cointegration test. Results show that the volatility of the U. S. and Japanese interest rates impose a significant influence in money demand in Malaysia. However, the opportunity cost of holding money remains to impose a larger effect on the money demand function.

 

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Published

05-06-2004

Issue

Vol. 11 No. 1 (2004): International Journal of Management Studies (IJMS) Vol. 11, No. 1 June 2004

Section

Articles

Research impact

Harvested 2026-09-08
2 citations, from OpenAlex — the highest of the sources checked

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Identifiers DOI 10.32890/ijms2004.11.1.5 OpenAlex W165029290