Post Keynesian interest rate exogeneity: evidence from Malaysia / Sabri Nayan ... [et al.]

Nayan, Sabri and Kadir, Norsiah and Yusof, Abdul Hafiz and Mohamad Ali, Noor Azillah (2014) Post Keynesian interest rate exogeneity: evidence from Malaysia / Sabri Nayan ... [et al.]. In: TeSSHI 2014, 5-6 Nov 2014, One Hotel Helang, Langkawi Kedah Malaysia.

Abstract

In an economy where money supply is endogenous, interest rate serves as the key instrument of monetary policy. The operation of monetary policy through the setting of a key interest rate and not through a money supply target is actually the fundamental tenet of Post Keynesian economics that money supply is endogenous; that interest rate rather than the stock of money should be the focus of monetary policy. While the proposition of money endogeneity (or interest rate exogeneity) is generally accepted by all Post Keynesians, they disagree on one related question: to what extent are interest rates set exogenously by central banks? While this issue has become the focus of debate between the Horizontalists and Structuralists, the ability of a central bank to influence economic activity would depend much on the interaction between official rate and market rates. The major interest of the present paper is to examine this issue of interest rate transmission mechanism based on the Malaysian data. Employing the cointegration and vector error correction model procedures to analyze the data, results of the study indicate that the pass through from the overnight policy rate to two short term market rates is less than complete.

Metadata

Item Type: Conference or Workshop Item (Paper)
Creators:
Creators
Email / ID Num.
Nayan, Sabri
sabrinayan585@yahoo.com
Kadir, Norsiah
norsiahkadir@perlis.uitm.edu.my
Yusof, Abdul Hafiz
hafiz459@perlis.uitm.edu.my
Mohamad Ali, Noor Azillah
azillah853@perlis.uitm.edu.my
Subjects: H Social Sciences > HB Economic Theory. Demography
H Social Sciences > HB Economic Theory. Demography > Economics
H Social Sciences > HB Economic Theory. Demography > Business cycles. Economic fluctuations. Economic indicators
Divisions: Universiti Teknologi MARA, Kedah > Sg Petani Campus
Event Title: TeSSHI 2014
Event Dates: 5-6 Nov 2014
Page Range: pp. 896-910
Keywords: Post Keynesian Economics, horizontalists, structuralists, exogeneity
Date: November 2014
URI: https://ir.uitm.edu.my/id/eprint/35629
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