TY - JOUR AU - Dahalan, Jauhari PY - 2004/12/01 Y2 - 2024/03/29 TI - Divisia Index Monetary Aggregates: Do they Matter for Monetary Policy in Malaysia? JF - Malaysian Management Journal JA - MMJ VL - 8 IS - 1 SE - Articles DO - UR - https://e-journal.uum.edu.my/index.php/mmj/article/view/8753 SP - 39-54 AB - <div>Divisia for narrowly and broadly defined monetary aggregate of a developing country Malaysia, are&nbsp;constructed. Unlike the Divisia for narrowly defined monetary aggregate MI, the Divisia for broader&nbsp;defined monetary aggregate M2 does show significant differences in both level and growth rates that&nbsp;signified the degree of the important and usefulness of Divisia index in formulating the monetary policy We ascertained that there exist long-run relationships between all measures of monetary aggregates in&nbsp;this study with inflations. By constructing dynamic error-correction models for all the alternative measures of monetary aggregates. we performed out-of-sample forecasting for three different periods. Analysis&nbsp;of the forecasting statistics indicates that the Divisia monetary aggregates performed better than their simple-sum counterparts in forecasting ability. We conclude that Divisia monetary aggregate namely&nbsp;Divisia M2, has the best forecast ability among all. As such, Divisia M2 can serve as an excellent candidate as a target or indicator in formulating the monetary policy for Malaysia.</div><p>&nbsp;</p> ER -