Can Inflation be Claimed As A Monetary Phenomenon? The Malaysian Experience

Authors

  • Chor Foon TANG Universiti Sains Malaysia, Penang
  • Ilhan Ozturk

Abstract

The purpose of this study is to empirically re-investigate the money-prices nexus for Malaysia through the cointegration and causality techniques. This study covered the monthly data from 1971:M1 to 2014:M8. The Maki multiple breaks cointegration test suggests that the variables are cointegrated. Furthermore, the MWALD test shows a unidirectional causal relationship run from money supply (M2) to aggregate prices, meaning that only the monetarist's view exist in the Malaysian economy. However, the time-varying causality tests indicate that inflation is not always a monetary phenomenon in Malaysia. Therefore, the contractionary monetary policy may not an effective instrument in managing inflationary behaviour in Malaysia.  

Keywords: Cointegration; Inflation; Money; Recursive regression; Rolling regression

JEL Classifications: C22; E31; E51

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Published

2017-06-29

How to Cite

TANG, C. F., & Ozturk, I. (2017). Can Inflation be Claimed As A Monetary Phenomenon? The Malaysian Experience. International Journal of Economics and Financial Issues, 7(3), 453–460. Retrieved from https://econjournals.com/index.php/ijefi/article/view/4655

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