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REAL STOCK PRICES AND THE LONG-RUN MONEY DEMAND FUNCTION IN MALAYSIA: Evidence from Error Correction Model

Gadjah Mada International Journal of Business (GamaIJB) · Vol. 6 No. 2 (2004) · pp. 293–305

DOI
10.22146/gamaijb.5547
ISSN
2338-7238, 1411-1128
Published
2004-06-12
Publisher
Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada
Language
eng

Abstract

This study adopts the error correction model to empirically investigate the role of real stock prices in the long run-money demand in the Malaysian financial or money market for the period 1977: Q1-1997: Q2. Specifically, an attempt is made to check whether the real narrow money (M1/P) is cointegrated with the selected variables like industrial production index (IPI), one-year T-Bill rates (TB12), and real stock prices (RSP). If a cointegration between the variables, i.e., the dependent and independent variables, is found to be the case, it may imply that there exists a long-run co-movement among these variables in the Malaysian money market. From the empirical results it is found that the cointegration between money demand and real stock prices (RSP) is positive, implying that in the long run there is a positive association between real stock prices (RSP) and demand for real narrow money (M1/P). The policy implication that can be extracted from this study is that an increase in stock prices is likely to necessitate an expansionary monetary policy to prevent nominal income or inflation target from undershooting.

Keywords

Collaboration network of the authors

13 authors · 16 co-authorship links · 10 across different organisations

Hover or tap a name to highlight its co-authors. Double-click to open the author's page.

  • International Islamic University Malaysia
  • Universitas Syiah Kuala
  • Universiti Malaysia Sarawak
  • Universiti Teknologi Petronas
  • International Centre for Education in Islamic Finance
  • Universiti Sains Malaysia
  • Affiliation unknown
  • Different organisations
  • Same organisation
  • Affiliation unknown
  • Thicker line = more joint articles · bigger circle = more articles
Show as table
Co-authorOrganisationJoint articles
Hartomi MaulanaAffiliation unknown1
Said MusnadiUniversitas Syiah Kuala1
Indra Yadi PutraUniversitas Syiah Kuala1
Bakri bin Abdul KarimUniversiti Malaysia Sarawak1
Samsul Ariffin Abdul KarimUniversiti Teknologi Petronas1
Salina KassimInternational Islamic University Malaysia1
Mohd Azmi OmarInternational Centre for Education in Islamic Finance1
Ronald RulindoInternational Islamic University Malaysia1
Rosylin Mohd YusofInternational Islamic University Malaysia1
Hasan BasriUniversitas Syiah Kuala1
A.K. Siti‐NabihaUniversiti Sains Malaysia1

Affiliations come from OpenAlex; journal OAI-PMH metadata carries none. Authors without an OpenAlex ID are matched by name, which can merge or split people.

Metadata source: OAI-PMH (metadata jurnal) https://journal.ugm.ac.id/gamaijb/oai, first harvested 28 Okt 2026, last seen 28 Okt 2026.
Original metadata (oai_dc) 
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	<dc:title xml:lang="en-US">REAL STOCK PRICES AND THE LONG-RUN MONEY DEMAND FUNCTION IN MALAYSIA: Evidence from Error Correction Model</dc:title>
	<dc:creator>Abdullah, Naziruddin</dc:creator>
	<dc:creator>Abd. Majid, M. Shabri</dc:creator>
	<dc:subject xml:lang="en-US">error correction model (ECM); real stock prices; money demand</dc:subject>
	<dc:description xml:lang="en-US">This study adopts the error correction model to empirically investigate the role of real stock prices in the long run-money demand in the Malaysian financial or money market for the period 1977: Q1-1997: Q2. Specifically, an attempt is made to check whether the real narrow money (M1/P) is cointegrated with the selected variables like industrial production index (IPI), one-year T-Bill rates (TB12), and real stock prices (RSP). If a cointegration between the variables, i.e., the dependent and independent variables, is found to be the case, it may imply that there exists a long-run co-movement among these variables in the Malaysian money market. From the empirical results it is found that the cointegration between money demand and real stock prices (RSP) is positive, implying that in the long run there is a positive association between real stock prices (RSP) and demand for real narrow money (M1/P). The policy implication that can be extracted from this study is that an increase in stock prices is likely to necessitate an expansionary monetary policy to prevent nominal income or inflation target from undershooting. </dc:description>
	<dc:publisher xml:lang="en-US">Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada</dc:publisher>
	<dc:date>2004-06-12</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
	<dc:type>info:eu-repo/semantics/publishedVersion</dc:type>
	<dc:type xml:lang="en-US">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.ugm.ac.id/gamaijb/article/view/5547</dc:identifier>
	<dc:identifier>10.22146/gamaijb.5547</dc:identifier>
	<dc:source xml:lang="en-US">Gadjah Mada International Journal of Business; Vol 6, No 2 (2004): May-August; 293 - 305</dc:source>
	<dc:source>2338-7238</dc:source>
	<dc:source>1411-1128</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.ugm.ac.id/gamaijb/article/view/5547/4518</dc:relation>
</oai_dc:dc>