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: Suggested Citation
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