Demand for M2 in an Emerging-Market Economy: An Error-Correction Model for Malaysia

49 Pages Posted: 10 Feb 2006

Date Written: December 1999

Abstract

This paper analyses demand for M2 in Malaysia from August 1973 to December 1995 under both the closed- and open-economy framework. Based on the cointegration and weak-exogeneity test results, short-run dynamic error-correction models are specified and estimated. The results indicate that the demand is for real MZ. Both the long- and short-run models are well-specified and are fairly stable. The long-run income elasticity is close to one with the opportunity cost variables carrying the expected signs. The external events have some influence on the stability.

Keywords: Asia, Malaysia, financial system, money demand, cointegration, error-correction

JEL Classification: E41, E44, G2

Suggested Citation

Sriram, Subramanian, Demand for M2 in an Emerging-Market Economy: An Error-Correction Model for Malaysia (December 1999). IMF Working Paper No. 99/173, Available at SSRN: https://ssrn.com/abstract=880828

Subramanian Sriram (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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