UPSI Digital Repository (UDRep)
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UPSI Digital Repository (UDRep)
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| Abstract : Universiti Pendidikan Sultan Idris |
| Historically, the development of the country's economy has explained how the country's financial and fiscal policies are being utilized in order to achieve the country's goals of increasing productivity and achieving developed nation status. The dynamic integration of the two policies each year requires a detailed investigation, especially as they involve specific policies to address the economic crisis. Thus, the motivation of this study is to examine the dynamic relationship between money, output and economic growth in two different exchange rate regimes in Malaysia, namely exchange rates before the Asian financial crisis (floating exchange rate) and exchange rates after the Asian financial crisis (floating with basket currencies exchange rate). Although many similar studies have been carried out, there is still little exploration in the issues studied involving different exchange rate regimes, particularly for Malaysian issues. In order to achieve this objective, monthly frequency time series data is used starting January 1990 until December 2018. The selected macroeconomics data is utilized, namely industrial production index, broad money, consumer price index, lending interest rate, net export, and bilateral exchange rate. The two exchange rate regimes are based on announcemen commitment by the Central Bank of Malaysia, in dealing with the Asian financial crisis in 1997. This study adopted the Sims approach which includes multivariate Johansen Juselius co-integration test and vector error correction model. The results suggest that, broad money and output are moving together in the same direction in the long term to develop the long-term equilibrium among the variable in the equations system across the regimes. The results further suggest that, the output and broad money plays an important role in driving economic growth in Malaysia in every condition of the economi scenario, across the exchange rate regime. This has been proven by the significance result of broad money and output across the regimes under investigation |
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