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Stock Prices, Foreign Opportunity Cost, and Money Demand in Malaysia: A Cointegration and Error Correction Model Approach
Jurnal Ekonomi Malaysia
View Archive Info| Field | Value | |
| Title |
Stock Prices, Foreign Opportunity Cost, and Money Demand in Malaysia: A Cointegration and Error Correction Model Approach
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| Creator |
Abdul Karim, Mohd Zaini
Guan, Tang Boon |
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| Description |
ABSTRACTThe main purpose of this study is to investigate the relevance of stock price and foreign opportunity cost variables to the money demand function in Malaysia using quarterly data over the period of 1982:1 to 1998:2 byemploying recently developed econometric techniques of cointegration and error correction modeling. To take into account the effect of Asian Financial Crisis in mid 1997 on the behavior of the demand for money in Malaysia, the sample period is divided into two sub-samples: 1982:1to 1996:4 and 1982:1 to 1998:2. The results provide evidence that the crisis somewhat affect the behavior of the money demand. The results of the study also show that the real money balances, real income, money’s own rate of return, the rate of return of alternative assets, stock prices, expected exchange rate depreciation and foreign interest rate are cointegrated suggesting the existence of a stable long run relationship among them in spite of the financial liberalization and innovation process thatthe Malaysian financial system has been experiencing. In addition, the results also indicate the dominance of wealth effect over substitution effect and the presence of currency substitution in Malaysia.Keywords: stock prices; foreign opportunity cost; money demand; cointegrationABSTRAKTujuan utama kajian ini ialah untuk menyiasat kerelevanan harga stok dan pembolehubah kos melepas asing dalam fungsi permintaan wang di Malaysia dengan menggunakan teknik kointegrasi dan model pembetulan ralat. Analisis dijalankan menggunakan data sukuan bagi jangkamasa1982:1 hingga 1998:2. Bagi mengambilkira kesan krisis kawangan Asia pada pertengahan tahun 1997 ke atas gelagat permintaan wang di Malaysia, sample data dibahagikan kepada dua jangkamasa; 1982:1 hingga1996:4 dan 1982:1 hingga 1998:2. Hasil kajian menunjukkan krisis kewangan mempunyai kesan keatas gelagat permintaan wang. Hasil kajian juga menunjukkan baki benar, pendapatan benar, kadar pulangan wang, kadar pulangan asset alternatif, harga stok, penurunan nilai kadar tukaran asing dijangka, dan kadar faedah asing adalah berkointegrasi. Ini menunjukkan keujudan hubungan jangka panjang yang stabil antara pembolehubahtersebut walaupun sistem kewangan negara mengalami proses liberalisasi dan inovasi. Di samping itu, hasil kajian juga menunjukkan kesan pendapatan adalah lebih dominan berbanding kesan penggantian dan keujudan penggantian matawang di Malaysia.
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| Publisher |
Universiti Kebangsaan Malaysia
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| Date |
2012-12-07
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article — |
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| Format |
application/pdf
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| Identifier |
http://ejournal.ukm.my/jem/article/view/1642
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| Source |
Jurnal Ekonomi Malaysia; Vol 38 (2004): Jurnal Ekonomi Malaysia
0126-1962 |
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| Language |
eng
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| Relation |
http://ejournal.ukm.my/jem/article/view/1642/1407
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