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Broad Money Demand and Financial Liberalization in Malaysia: An Application of the Nonlinear Learning Function and Error-Correction Models

M Azali and Kent Matthews

Pertanika Journal of Tropical Agricultural Science, Volume 9, Issue 2, September 2001

Keywords: Broad money demand, financial liberalization and innovation, nonlinear learning function, and error-correction model

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Abstract

This paper attempts to model the effects of financial liberalization and innovations on the demand for broad money in Malaysia, The nonlinear learning function and error-correction mechanism model were utilized. The results of encompassing tests and dynamic (ex post) simulation confirm the error-correction as the parsimonious specification. The augmented error-correction model with nonlinear interacted variables is unable to detect the effects of financial liberalization on Malaysian broad money demand.

ISSN 1511-3701

e-ISSN 2231-8542

Article ID

JSSH-0140-2001