Date of Award

1-1-2000

Thesis Type

Masters

Document Type

Thesis

Divisions

Faculty of Business and Economics

Department

-

Institution

Universiti Malaya

Abstract

Financial liberalization had caused instability in the money demand function as well as in the velocity of money. As a result, money supply is no longer reliable as the main intermediate target and there appeared to be a shift in the technique of monetary control towards greater reliance on interest rates as the main operating instrument. Developing countries that continue to emphasize on quantitative method in their monetary framework while at the same time implement financial refom1s may face the problem of a loss of monetary control and hence, monetary policy may possibly not be effective in influencing income or prices. Although Malaysia has moved to give greater emphasis to interest rates in its monetary operations since the 1990s, it continues to rely on M3 as the implicit intennediate target. The shift in monetary framework has allowed for greater flexibility in the conduct of monetary policy. This move has made monetary policy become more effective in affecting real output and prices. During the sample period under review, broad money M3 appeared to statistically show low significance in its predictive power with respect to income. Nevertheless, both narrow money Ml and broad money M3 were found to have long run relationships with real output but not with prices. However, both aggregates seemed to be poor variables in their role in providing information to movements in prices. On the other hand, interest rates have gained significance and this is evidence by the empirical results in this study.

Initial

snms

Additional Information

Dissertation (M.A) -- Faculty of Business and Economics, Universiti Malaya, 2000.

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