Industrial training report: Permodalan Nasional Berhad (PNB). Special project: The determinants of inflation rate in Malaysia

This study examines the key determinants of inflation in Malaysia, focusing on a comprehensive set of macroeconomic variables. The analysis employs inflation as the dependent variable and evaluates the influence of five critical independent variables such as money supply, exchange rate, unemployment rate, interest rate, and economic growth.
Our findings show that money supply and the exchange rate are insignificantly directly related to inflation, implying that changes in the money supply and exchange rate fluctuations are not major determinants of inflationary pressures in Malaysia. This may mean that other mechanisms could be at work apart from the traditionally hypothesized roles of these variables in inducing inflation in Malaysia. The unemployment rate is inversely related, indicating that high unemployment suppresses inflation, which is consistent with the framework of the Phillips curve. Interest rates, as a function of monetary policy, are significantly negatively correlated with inflation and, therefore, confirm their power in demand management for keeping inflation at bay. Lastly, economic growth shows a significant positive relationship with inflation, indicating the rise in demand-pull inflationary pressures in a growing economy. These findings provide some very useful implications for the Malaysian policymakers in asserting the need for a balanced approach toward money supply management, exchange rate stabilization, unemployment reduction, and interest rate adjustments that ensure sustained economic growth with controlled inflationary pressures.
This research also provides a profile of the internship place, Permodalan Nasional Berhad (PNB). Permodalan Nasional Berhad is Malaysia's premier investment management company, formed in 1978 to make available and ensure an equitable distribution of wealth and adequate economic participation among Malaysians. It is a trust institution that manages and grows hard-earned savings for millions of Malaysians across various investment schemes, unit trusts, and institutional funds. For decades, PNB has been at the forefront of the country's economic progress through the provision of investments in its varied portfolio assets consisting of equities, real estate, and fixed income instruments.