Real Interest Rate Behaviour and Monetary Policy in Myanmar:Based on Financial Libralisation Hypothesis

35 Pages Posted: 15 Jun 2021

See all articles by Dr.Si Thu Han

Dr.Si Thu Han

Hunan University; Hunan University

Multiple version iconThere are 2 versions of this paper

Date Written: June 13, 2021

Abstract

McKinnon’s complementarity hypothesis articulates that money and physical
capital complements each other instead of substituting under a repressed financial
sector. In spite of various economic and financial reforms in Myanmar, the
financial sector of Myanmar is lagging behind international standards. Thus, this
study is designed to test McKinnon’s complementarity hypothesis in case of
Myanmar. Time series studies has been analyzed for said purpose. This study not
only determines unit root problem but also tests unit root problem in presence of
structural break. Long run relationship is testified through bounds test in presence
of structural break. Long run and short run estimates are determined in order to
check McKinnon’s complementarity hypothesis in static and dynamic setting as
bounds testing approach distinguish feature is to provide static long run estimates
along with dynamic short run estimates. Moreover, this study applies innovative
accounting approach to determine strength of casual relationship between
variables of the study. Results of the study confirms McKinnon’s
complementarity hypothesis in long run and no evidence is found in case of short
run. Thus, it can be deduced that investment is restricted due to availability of
finance rather than cost of capital in Myanmar.

Keywords: McKinnon’s complementarity hypothesis; money; investment; bounds testing approach

JEL Classification: E22, E41, E50, G10

Suggested Citation

Han, Si Thu and Han, Si Thu, Real Interest Rate Behaviour and Monetary Policy in Myanmar:Based on Financial Libralisation Hypothesis (June 13, 2021). Available at SSRN: https://ssrn.com/abstract=3866051 or http://dx.doi.org/10.2139/ssrn.3866051

Si Thu Han (Contact Author)

Hunan University ( email )

Lushan S Rd, Changsha
Changsha, CA 410082
China

Hunan University ( email )

Lushan S Rd, Changsha
Changsha, CA 410082
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
21
Abstract Views
179
PlumX Metrics