Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9553667 | Journal of Asian Economics | 2005 | 17 Pages |
Abstract
Divisia M1 and M2 are constructed for Malaysia. Unlike M1, Divisia M2 shows significant differences in both level and growth rates from its simple sum counterpart. We also compare these Divisia measures to simple sum M1 and M2 in a money demand function. Using error correction models, we examine short-run dynamics between these monetary aggregates and money demand determinants such as inflation, domestic and foreign interest rates, financial wealth, and income. We find that Divisia M2 is the most appropriate monetary aggregate of the four candidates to track money demand in Malaysia and should be used when conducting monetary policy.
Related Topics
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Authors
Jauhari Dahalan, Subhash C. Sharma, Kevin Sylwester,