Real Versus Nominal Adjustment Mechanism of the Malaysian Money Demand Function : Further Evidence

Authors

  • Muzafar Shah Habibullah Department of Economics Faculty of Economics and Management, Universiti Pertanian Malaysia, Malaysia

DOI:

https://doi.org/10.32890/mmj1992.1.1.6

Abstract

This article investigates the issue of real versus nominal adjustment specifications in the Malaysian money demand function. Performance of both specifications was subjected to several tests, namely ; model specification ex-post forecasting ability and stability tests. Our results shows that under both specifications, the Malaysian money demand function for M1, M2 and M3 are not stable for the period 1962 – 1991. Our question is, does financial innovation during the period of 1979 – 1991 affected the stability of the Malaysian money demand function? A test on Gurley-Shaw hypothesis was done to answer the above question. However, our results suggest that financial innovation does not play a major role in affecting the Malaysian money demand function during the period under study. Nevertheless, the interest rate elasticities (for both short-run and long-run) has been declining over the period of 1979 – 1991, indicating the effectiveness of monetary policy as a policy tool.

 

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Published

01-09-1992

Issue

Vol. 1 No. 1 (1992): Malaysian Management Journal (MMJ) Vol. 1 No. 1 September 1992

Section

Articles

How to Cite

Habibullah, M. S. (1992). Real Versus Nominal Adjustment Mechanism of the Malaysian Money Demand Function : Further Evidence. Malaysian Management Journal, 1(1), 57-69. https://doi.org/10.32890/mmj1992.1.1.6

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Identifiers DOI 10.32890/mmj1992.1.1.6 OpenAlex W1768939118

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