Exploring the Nexus: Exchange Rate, Inflation, Interest and Economic Growth in Malaysia
CFGB 6302 Money and Banking
MASTER OF BUSINESS ADMINISTRATION GRADUATE SCHOOL OF BUSINESS FACULTY OF BUSINESS AND ACCOUNTANCY UNIVERSITY OF MALAYA KUALA LUMPUR, MALAYSIA
Exploring the Nexus: Exchange rate, Inflation, Interest and Economic Growth in Malaysia
LECTURER: DR CHAN SOK GEE Semester 2, 2012/2013
Group Members: No. 1 2 3 4 5 Name Ijaz Ur Rehman Rene Tan Nor Hamizan Bt Mohamad Ishar Dk Hjh Faizahanim Noor Faraliza Mohamad Noor Matrix No. CHA 120013 CGA 120061 CGA 120071 CGA 110120 CGA120036
Date of Submission: 25 May 2013
1
CFGB 6302 Money and Banking
1.0
Introduction
Monetary policy is a method by the government via the central bank to control the money supply that will affect the inflation, interest rates and exchange rates in the economy based on Mishkin (2012). The monetary policy is coordinated closely with other instruments as it encompasses the monetary aspect of the general economic policy. The effectiveness of one monetary policy to another varies for all economies due to the difference in capital markets and economic structure. One form of monetary policy may be effective towards economic development in an economy but may not result in the same effect in another economy. The ultimate goal of the monetary policy is to achieve economic growth. This is achieved by price stability and strong employment rates in the economy. Economic development is usually measured in terms of employment and income, but it also includes improvements in education, healthcare, social welfare and environmental sustainability according to Jacobs (2010). An expansionary monetary policy is the action to increase a country’s money supply. On the other hand, a contractionary monetary policy is aimed to reduce the money supply in the economy.
1.1
The impact of money supply, interest rates and inflation on economic
development The money supply in an economy is the sum of currency and deposits in the economy. There are three definitions of
MASTER OF BUSINESS ADMINISTRATION GRADUATE SCHOOL OF BUSINESS FACULTY OF BUSINESS AND ACCOUNTANCY UNIVERSITY OF MALAYA KUALA LUMPUR, MALAYSIA
Exploring the Nexus: Exchange rate, Inflation, Interest and Economic Growth in Malaysia
LECTURER: DR CHAN SOK GEE Semester 2, 2012/2013
Group Members: No. 1 2 3 4 5 Name Ijaz Ur Rehman Rene Tan Nor Hamizan Bt Mohamad Ishar Dk Hjh Faizahanim Noor Faraliza Mohamad Noor Matrix No. CHA 120013 CGA 120061 CGA 120071 CGA 110120 CGA120036
Date of Submission: 25 May 2013
1
CFGB 6302 Money and Banking
1.0
Introduction
Monetary policy is a method by the government via the central bank to control the money supply that will affect the inflation, interest rates and exchange rates in the economy based on Mishkin (2012). The monetary policy is coordinated closely with other instruments as it encompasses the monetary aspect of the general economic policy. The effectiveness of one monetary policy to another varies for all economies due to the difference in capital markets and economic structure. One form of monetary policy may be effective towards economic development in an economy but may not result in the same effect in another economy. The ultimate goal of the monetary policy is to achieve economic growth. This is achieved by price stability and strong employment rates in the economy. Economic development is usually measured in terms of employment and income, but it also includes improvements in education, healthcare, social welfare and environmental sustainability according to Jacobs (2010). An expansionary monetary policy is the action to increase a country’s money supply. On the other hand, a contractionary monetary policy is aimed to reduce the money supply in the economy.
1.1
The impact of money supply, interest rates and inflation on economic
development The money supply in an economy is the sum of currency and deposits in the economy. There are three definitions of