Abstract
In 2013, the minimum wage policy was executed in Malaysia. Despite the minimum wage at RM900 per month, the citizens still suffer low purchasing power. The introduction of GST in Malaysia effective April 1, 2015, despite being beneficial to the country, has taken its toll on the public. In addition to the existing escalating price problem, the significant sudden drop in ringgit value has pushed the public to voice their concern over another financial crisis similar to or worse than the Asian financial crisis. The ability of people to hold money and to survive in this economy is worrisome. Therefore, this study is conducted to (i) determine the long-run effect of real income, fixed deposit rate, savings deposit rate, and exchange rate on demand for money in Malaysia and (ii) examine the direction of relationship between real money demand and its independent variables from 2003 to 2015 (quarterly). Using a multivariate framework, this study employs money demand function. The estimated results postulate that there is a long-run relationship between real money balance and all independent variables. A bidirectional relationship between real money balance and GDP is also detected.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Abdullah, H., Ali, J., & Matahir, H. (2010). Re-examining the demand for money in Asean-5 countries. Asian Social Science, 6(7), 146–155.
Bashier, A., & Dahlan, A. (2011). The money demand function for Jordan: An empirical investigation. International Journal of Business and Social Science, 2(5), 77–86.
Diagne, M. W. (2010). Real money demand, income, and interest rates in Senegal: Is there a long-run stable relation? International Advances in Economic Research, 16, 213–222.
Dritsaki, M., & Dritsake, C. (2009). A panel data approach to the demand for money in Bulgaria and Romania. Applied Economics Letters, 19, 705–710.
Hossain, A. A. (2012). Modelling of narrow money demand in Australia: An ARDL cointegration approach, 1970–2009. Empirical Economic, 42, 767–790.
Hsing, Y. (2008). Impacts of the exchange rate and the foreign interest rate on the argentine money demand function. Applied Economics Letter, 15, 35–39.
Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference and cointegration with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52, 169–210.
Kjosevski, J. (2013). The determinants and stability of money demand in the republic of Macedonia. Journal of Economics and Business, 31(1), 35–54.
Lee, C. C., & Chang, C. P. (2012). The demand for money in China: A reassessment using the bound testing approach. Romanian Journal of Economic Forecasting, 1, 74–94.
Manap, T. A. B. (2009). Stability of long-run money demand function: Evidence from Malaysia. International Islamic University Malaysia Journal of Economics and Management, 17(2), 261–285.
Nair, M., Samudram, M., & Vaithilingam, S. (2008). Malaysian money demand function revisited: The ARDL approach. Journal of Asia-Pacific Business, 9(2), 193–209.
Narayan, P. K. (2010). Modelling money demand for a panel of eight transitional economies. Applied Economics, 42, 3293–3305.
Narayan, P. K., Narayan, S., & Mishra, V. (2009). Estimating money demand functions for south Asian countries. Empirical Economic, 36, 685–696.
Paunescu, A. (2002). Determinants of demand for money in Romania. Bucharest: The Academy of Economic Studies.
Singh, R., & Kumar, S. (2010). Some empirical evidence on the demand for money in the Pacific Island countries. Studies in Economics and Finance, 27(3), 211–222.
Tang, T. C. (2007). Money demand function for Southeast Asian countries. An empirical view from expenditure components. Journal of Economics Studies, 34(6), 476–496.
Valadkhani, A. (2008). Long- and short-run determinants of the demand for money in the Asian-pacific countries: An empirical panel investigation. Annals of Economics and Finance, 9(1), 77–90.
Zulkifli, S. A. M. (2014). Money: The art of keeping it. In 14th International Academic Conference, pp. 321–331.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Singapore Pte Ltd.
About this paper
Cite this paper
Mohd Zulkifli, S.A. (2019). Money Demand: Case of Malaysia. In: Mat Noor, A., Mohd Zakuan, Z., Muhamad Noor, S. (eds) Proceedings of the Second International Conference on the Future of ASEAN (ICoFA) 2017 - Volume 1. Springer, Singapore. https://doi.org/10.1007/978-981-10-8730-1_44
Download citation
DOI: https://doi.org/10.1007/978-981-10-8730-1_44
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-10-8729-5
Online ISBN: 978-981-10-8730-1
eBook Packages: Political Science and International StudiesPolitical Science and International Studies (R0)