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In Malaysia, such a study has examined its implications through the impact of different types of economic sectors. Domac (1999), Tang (2003) and Ibrahim (2005) among others found that financial variables affect various sectors of the economy including agriculture, mining and quarrying, manufacturing, construction and even services. Kassim and Abdul Manap’s (2008) study focused on the impact of monetary policy variables on seven types of loans, including credit card loans, vehicle purchases, residential and others. These studies are all based on the standard Autoregressive Vector (VAR) approach to determine the impact of monetary policy variables on the sector under study.
Next evidence, Rich (1996) also studied the goals of the financial aggregate as a policy measure in Switzerland. This study has analyzed Switzerland’s monetary policy since it became a public foreign exchange system starting in 1973 following the collapse of the Bretton Woods system. Since 1991, the Swiss central bank has been using a medium-term strategy for 5 years, setting a target for financial growth.
Meanwhile, Davis (1990) has conducted research on aggregate financial targets as a guide to financial policy implementation in the United States. He has used the reduced form of equations to see how various aggregate finances affect US economic growth. The results of this study indicate that all these financial aggregates are used as guidelines for the implementation of financial policies.Developments over the last ten years have shown that ASEAN monetary policy has not produced sufficient results (Adjie, 1998 & Karseno, 1997). Financing budget deficits by raising money will also have an impact on increasing public demand for money.
Mohd. Azlan and Zulkefly in their research on the Relative Price Impact of Monetary Policy Shocks in Malaysia using the autoregressive vector model (SVAR) concluded that the shocks of the Malaysian monetary policy have resulted in varying degrees of response to aggregate inflation. For example, Frankel and Rose (2010) argue that lower interest rates can also encourage oil producing countries to keep oil underground for longer periods of time. This could reduce supply and lead to higher oil prices, with the same effect as other commodity prices.When prices are relative,there is a significant impact of monetary shocks said by Balke and Wynne (2007). In the short run, the share price nearly equalized as prices rose sharply in response to the contractionary shock.
Indicate from research on relationship between economic growth and commodity products by Shairilizwan Taasim and Remali Yusoff (2013) stated that the cocoa and rubber agriculture sector has no short-term impact on the country’s economic growth bur their Johansen’s analysis shows that the cocoa and rubber sectors have a long-term impact on the country’s revenues. The study concludes that cocoa and natural rubber are only effective for the country’s long-term GDP growth. This situation shows that the agricultural industry is still relevant to the national income despite the declining trend of declining production and the increase in labor productivity. Amoro and Shen (2013) using OLS analysis showed that there is a positive relationship between commodity products and exports but that they are very sensitive to global prices and weather conditions. Nonetheless, their impact on the country’s results according to Musila (2004) which examined the general market impact of South Africa on exports from Kenya found that exports were influenced by the number of exports rather than the high prices of an export commodity, which in turn impacted Kenya’s GDP.
In addition, a study by Gerald and Dwyer (2001) also identified the relationship between money and price levels in the United States using quarterly data from 1953 to 1997. The study found that money growth and previous inflation rates were important to predict inflation.Mohd Adib & Siti Sarah (2015) in their paper The Impact of Financial Constraints on Firms’ Productivity in Malaysia , their empirical results show that financial factors have a significant impact on a firm’s productivity. It is found that the firm’s cash flows affect the firm’s productivity. This shows the firm lacks internal funds.This proved how monetary condition affect even a firm not to mention when its related to a country.
According to the findings of the Jusoh study, M. (1990) shows seigniorage plays an important role in enhancing fiscal resilience in Malaysia. Therefore, the presence of seigniorage sources can cause problems in the sector cycle financial. The rationale is that when money supply goes up, the interest rate in the country fell. The fall in interest rates has led to an investment in domestic financial assets become less competitive. This situation may even worsen the country’s capital account as a result from the flow of capital abroad. This will surely cause demand the local currency weakened and led to the value of foreign exchange rates increase.
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