Malaysian Money Demand Function Revisited: The ARDL Approach

Nair, Mahendhiran; Samudram, Muthi; Vaithilingam, Santha

doi:10.1080/10599230801981944

Cited by 11 publications

(6 citation statements)

References 28 publications

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“…The results imply that the crisis may have created distress in the financial sector and the economic growth of the countries, however, the relationship dynamics concerning energy consumption are not affected over time. The result is in line with the findings of [67], who found no evidence of a structural break in the cointegrating relationship among variables. However, the context of their study was different as they were studying the relationship between real money demand, GDP and money supply.…”

Section: Countrysupporting

confidence: 92%

“…However, as the Chow test evidences the presence of structural breaks, we further consider the effect of the break in the long-run relationship among variables. Following the procedure in [67], the Gregory and Hansen test is performed to check if the structural break asserts any significant influence on the long-run relationship among variables.…”

Section: Resultsmentioning

confidence: 99%

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Energy–Finance–Growth Nexus in ASEAN-5 Countries: An ARDL Bounds Test Approach

et al. 2019

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This study examines the relationship between energy consumption, financial development and economic growth for ASEAN-5 countries, namely Malaysia, Indonesia, the Philippines, Singapore and Thailand, over the period from 1980 to 2017. Finance-growth and energy-growth relationships have been well researched; however, the energy-finance-growth nexus is an equally important but less explored area. Our Auto Regressive Distributed Lags (ARDL) bounds test for cointegration results suggests that the variables tend to move together in the long run for all countries, apart from Indonesia. Our study also considers the effect of a structural break due to financial crisis and confirms that the break does not affect the long-term relationship among the variables; in other words, the financial crisis does not affect the energy-finance-growth nexus. Hence, considering the consistency of energy consumption, the importance of the energy sector must not be undermined, and appropriate energy policies are instrumental in maintaining a well-managed financial sector for sustainable economic growth.Sustainability 2020, 12, 5 2 of 16 demand [15], while the importance of financial variables in investigatng the energy-growth nexus is well documented by [16]. Financial development indicates the actual level of financial resources available for production and channels these funds through banks and stock markets [17]; thus, this promotes economic growth by boosting investment via transparent transactions for productive ventures [15]. A higher level of economic development through raising the capacity of the production sector and attracting foreign investment requires a stable power supply, which necessitates support by the financial sector through channeling resources to the energy sector [18]. A well-developed financial market makes financial resources available to high-return projects; at the same time, this implies better accounting and reporting standards, which increases investors' confidence [19], and attracts Foreign Direct Investment(FDI) [7]; which in turnaffects energy consumption. Similarly, financial development increases energy consumption by enhancing liquidity through the allocation of assets to appropriate ventures [15]. Hence, financial development affects the growth of an economy, which may influence energy consumption [20], and consequently, can act as the missing link in the energy-growth nexus [5]. With the growth in the economy, more productive inputs are needed which are supported by activities such as capital accumulation and energy expenditure where the role of finance is undisputable [21].However, to date, the nature of the relationship remains inconclusive from the relatively small amount of prevailing literature. Some researchers have found a negative relationship between energy consumption and financial development [22], while others detect a positive relationship [13,23]. Similarly, the results of the cointegration and causality analysis-based studies are also inconclusive. Several studies reported bidirectional ...

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Section: Countrysupporting

confidence: 92%

Section: Resultsmentioning

confidence: 99%

Energy–Finance–Growth Nexus in ASEAN-5 Countries: An ARDL Bounds Test Approach

et al. 2019

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“…Evidence was found that the stability function for M2 became unstable after 1997. This finding opposes the findings of Nair et al (2008) who concluded that the Asian financial crises had no effect on the stability of money demand in Malaysia. Alvarez & Lippi (2014) provided evidence from a segmented asset market following a one-time increase in liquidity; which implies a continuous fall in interest rates.…”

Section: Literature Reviewcontrasting

confidence: 99%

Long-Run Money Demand in Ghana: In Search of Stability

Asiedu¹,

Nazirou²,

Sabrina³

2020

JFRM

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In this study, we employed annual time series data of Ghana from 1982 to 2019 to examine the long-run money demand function and its stability. Through the methods of co-integration, Vector Error Correction Model, Auto-regressive Distributed Lag bounds test, CUSUM test (cumulative sum of the recursive residuals) and CUSUM sq test (cumulative sum squared of the recursive residuals) we established total stability and long-run relationship between money demand function and its determining factors. Accordingly, our key recommendation is for monetary policymakers to improve on their supervision and monitoring role in the financial market and institutions to avert failures within the sector such as what happened beginning 2014 with the proliferation of several Ponzi-schemes. Monitoring and supervision are key to the maintenance of confidence and stability in the monetary system.

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“…They also argue that the inclusion of the inflation‐rate volatility in money demand functions solves the instability problem in those countries. Nair et al (2008) investigates the 1997 Asian crisis on the long‐run and short‐run behavior of the demand for money in Malaysia. They find that the Asian crisis did not have a significant impact on the cointegration relationship between money demand and its determinants.…”

Section: Introductionmentioning

confidence: 99%

Economic uncertainty and money demand stability in Turkey

Özdemir

Saygılı

2013

Journal of Economic Studies

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PurposeThe purpose of this paper is to investigate whether the inclusion of uncertainty variables in the demand for money function can produce a stable relationship in Turkey.Design/methodology/approachThe stability of a money demand function is studied by testing parameter constancy of long‐run money demand function. To this end, the authors perform Nymblom type tests in the context of the Coingtegrated VAR methodology.FindingsThe findings show that inclusion of appropriate measure of uncertainty is necessary to estimate a stable and consistent money demand function for Turkey.Originality/valueThe empirical application of Nymblom type stability tests on cointegrated VAR money demand systems is very recent and to the authors' knowledge there has been no application of this methodology on emerging market economies. Therefore, this paper extends the literature to the emerging market economies.

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Malaysian Money Demand Function Revisited: The ARDL Approach

Cited by 11 publications

References 28 publications

Energy–Finance–Growth Nexus in ASEAN-5 Countries: An ARDL Bounds Test Approach

Energy–Finance–Growth Nexus in ASEAN-5 Countries: An ARDL Bounds Test Approach

Long-Run Money Demand in Ghana: In Search of Stability

Economic uncertainty and money demand stability in Turkey

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