Malaysia's Central Bank Response Post 1997 Asian Financial Crisis

Taylor's Business Review ISSN: 2232-0172 Vol 4 Issue 1, February 2014 pp. 31-53

23 Pages Posted: 27 Sep 2014

See all articles by Tinfah Chung

Tinfah Chung

HELP University; HELP University; HELP University

M. Ariff

University Putra Malaysia

Date Written: February 24, 2014

Abstract

This article explores Malaysia’s central bank, Bank Negara Malaysia’s (BNM) response to the 1997 Asian Finance Crisis. The article begins with the debate on the endogeneity of money and causality tests of money supply, liquidity and GDP using Malaysian data for the period 1982-2012. As money supply is endogenously determined by GDP and liquidity, BNM has shifted Malaysia’s monetary regimes – from monetary targeting to interest rate. An unstable demand for money, financial reforms and liberalisation of financial markets post 1997 are some factors which made monetary targeting difficult to achieve. BNM’s pursuit of development goals in enhancing efficient financial markets will contribute to a more effective interest rate transmission mechanism in the longer term.

Keywords: Monetary transmission mechanism, endogeneity, causality, cointegration, trivariate, Tinbergen, impossible trinity

JEL Classification: C22, E51, E52, E58

Suggested Citation

Chung, Tinfah and Ariff, M., Malaysia's Central Bank Response Post 1997 Asian Financial Crisis (February 24, 2014). Taylor's Business Review ISSN: 2232-0172 Vol 4 Issue 1, February 2014 pp. 31-53, Available at SSRN: https://ssrn.com/abstract=2500619

Tinfah Chung (Contact Author)

HELP University ( email )

Jalan Semantan
Kuala Lumpur, Kuala Lumpur 50490
Malaysia
35633902 (Phone)

HELP University ( email )

Jalan Semantan
Kuala Lumpur, 50490
Malaysia

HELP University ( email )

Kuala Lumpur
Malaysia

M. Ariff

University Putra Malaysia ( email )

Selangor Darul Ehsan
Serdang, Selangor 43400
Malaysia

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