Money-output granger non causality in a small open economy : Malaysian experience
The monetary expansion policy together with policy responses to development by the authorities to a much greater extent during the period of study (1976-1996) have resulted the causality running from money to output. Since we find that Ml has strongly influenced output, it is suggests that the au...
Saved in:
| Main Author: | |
|---|---|
| Format: | Thesis |
| Language: | English |
| Published: |
2000
|
| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/85018/1/FEP%202000%2011%20IR.pdf |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Summary: | The monetary expansion policy together with policy responses to development by the
authorities to a much greater extent during the period of study (1976-1996) have
resulted the causality running from money to output. Since we find that Ml has
strongly influenced output, it is suggests that the authorities may use Ml as
intermediate target for output growth without giving much pressure on price in the
long-run. We also find that Ml is suitable intermediate target for maintaining price
stability to curb inflation in the long-run. Strong Ml causal linkages on output is
consistent with the huge amount of non performing loans and large inflows of FDI
in Malaysia which both finally created excessive demand for money in the period of
study. In the case of M2, it does not have any causal linkages with output as this
findings support the monetary neutrality theory where M2 is found to be neutral in the
long-run. From this study we conclude that monetary targeting is still a relevant
policy amid the fast changing world, however, there must be in harmony with other
policy (e.g. trade, fiscal and exchange rate policy) to achieve sustainable economic
growth with price stability and external equilibrium. |
|---|