The endogenous money hypothesis: empirical evidence from Malaysia (1985-2000)

This paper examines the endogenous money supply hypothesis in the Malaysian environment from 1985 to 2000. The results are consistent with the Post Keynesian hypothesis, whereby the money supply in Malaysia was endogenous over the study period. The empirical results also showed a long-run cointegrating relationship between money income and the M3 money supply in Malaysia. While this supports the liquidity preference approach, causality between the total bank loans and the M3 money supply may also support the accommodationist view. However, the results did not support the structuralist approach, nor did it show opposition to this approach.