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Testing Long-Run Neutrality Of Money: Evidence From Malaysian Stock Market

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  • Chin-Hong Puah,
  • Muzafar Shah Habibullah
  • Kian-Ping Lim

Abstract

This paper presents the empirical evidence on the long-run neutrality (LRN) of money in the stock market in Malaysia, using seasonal adjusted monthly data from 1978:1 to 1999:12 , based on the bivariate ARIMA framework developed by Fisher and Seater (1993). Besides the main stock index, the sectoral stock indexes also have been tested by different measurements of money supply, namely, M1, M2 and M3. Generally, the findings support the LRN of money in Malaysia s stock market and the results are robust to the sensitivity tests of different monetary aggregates. This would imply that the permanent stochastic changes in money supply do not have an influential effect towards the real stock returns in Malaysia.

Suggested Citation

  • Chin-Hong Puah, & Muzafar Shah Habibullah & Kian-Ping Lim, 2006. "Testing Long-Run Neutrality Of Money: Evidence From Malaysian Stock Market," The IUP Journal of Applied Economics, IUP Publications, vol. 0(4), pages 15-37, July.
    • Handle: RePEc:icf:icfjae:v:05:y:2006:i:4:p:15-37
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    4. Wong, Soon-Ming & Loi, Siew-Ling, 2016. "Money Influence on Real Economy Activity: Evidences Review on Japanese Context," MPRA Paper 73559, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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