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December
2002
(Issue No. 116)
Synopsis
Role
of Money and Monetary Stability in Malaysia
M Zulkhibri A Majid and Dr
Azali Mohame
The main findings of this paper have shown that there exists a stable
long-run demand for money function for M3 in Malaysia during the period
1989?999 despite the large capital inflows and the presence of market control
in 1994 and 1998. The results also indicate the significant role of exchange
rate in the long run in determining the manner of money demand. This suggests
that the presence of capital control does affect the demand for Malaysian
currency in the short run but not in the long run. Therefore, M3 can be used as
an intermediate target in achieving monetary stability.
Economic
Effect of Capital Controls- A Malaysian Evidence
Andrej K. Karpinski and Victor Fang
Capital controls discouraging particular types of capital flows
may take different forms. They can be administrative (banning of cross-border
capital transactions), or they can be market based (capital gains or
withholding taxes or levies). The paper looks at the economic impact of
Malaysia's capital controls instituted in September 1998 to stem the flow of
funds out of the country. The measures were taken in response to confidence
crisis which had its roots in the summer of 1996 when the combination of
internal macroeconomic and external factors led to an attack on Thai baht and
the subsequent removal of its peg to US dollar. The evidence collected during
the Malaysian crisis suggests that capital controls may be positive given the
right set of conditions.
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Money
Velocity, Volatility and Policy - An Empirical Study Based on The Garch
Modelling
Dr Tan Hui Boon and Law Siong Hook
Monetary policy is frequently employed by Bank Negara Malaysia to
achieve strong economic performance over time. The rapid growth of the
Malaysian economy and the innovations in its financial system during the 1990s
had caused considerable instability in the relationship between the nominal GDP
and monetary aggregate. The money velocity, as a ratio of nominal GDP to the
monetary aggregate, had declined and marked the departure from its historical
patterns, casting doubt on the reliability of the monetary aggregate in
predicting the real economic activity and price stability. As a consequence,
Bank Negara shifted its monetary policy strategy from monetary targeting to
interest rate targeting in the mid-1990s.
The empirical results of this study support the
act by Bank Negara, as the velocity of money is significantly influence by the
changes in the interest rate and real GDP. A decrease in the interest rate
tends to increase the velocity of money, which in turn increases the real GDP.
The effect is magnified by the feedback causality between the money velocity
and real GDP. The increase in the real GDP will further increase the velocity
of money, and the causal effect running between these variables continue in a
cycle.
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Customer
Satisfaction of Commercial Banks: A Malaysian Case Study
Dr Balachandher
Krishnan Guru, Dr Avvari Mohan & Santha Vaithilingam
Bank Negara Malaysia has taken the decision to consolidate the banking
system in an effort to create strong domestic banking groups, which will be
well positioned to meet the demands of the customers in an increasingly
competitive banking environment. It is worth noting at this point that
consolidation of the domestic banking system alone is not sufficient to ensure
the success of the commercial banks in the face of foreign competition once
Malaysia opens her doors for foreign banks participation. To this extent,
customer satisfaction has been increasingly considered to be a basic
determinant of business success.
This
study is undertaken to determine some of the factors that contribute towards
the satisfaction of commercial bank customers in Malaysia. To this extent, the
objective of this study is two-fold, namely to determine the factors which
influence the satisfaction of local commercial bank customers and to examine
the association between customer satisfaction and bank profitability
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Optimal
Teller Windows In The Banking Industry
Dr Salleh Yahya, Dr Murali Sambasivan
and Seow Hsin Voon
The Queuing Theory has many applications in the service and
manufacturing industries. This paper discusses its application in banking and
specifically addresses the problem of optimum number of teller windows to be
opened. This paper assumes that the arrival rate of customers follows the
Poison distribution and the service time follow the Exponential distribution.
This assumption has been verified for a sample bank in Malaysia. Solutions are
offered, based on two approaches: (1) by considering only the "allowable"
waiting time, and (2) through a cost model. The cost model includes two cost
factors, namely the cost of opening an additional counter and the cost of
waiting time of the customer in the system. The authors believe that the cost
model can provide better results if the cost parameters are known with a fair
degree of accuracy.
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Influence
Of Heuristics In Bank Managers' Lending Decisions To Small Business
Dr Rosli Mahmood
This paper attempts to discuss the influence of heuristics or
intuition in the bank managers?lending decisions to small businesses and its
implications on the availability of funds to the small and medium-sized
enterprises in Malaysia. Bank managers operate under conditions of uncertainty
and asymmetry of information when lending to small businesses. These often lead
them to commit errors in their decisions such as turning down a good business
proposition which subsequently turns out to be a success or accepting a
proposition which turns out to be a business failure. As a consequence, these
bank managers tend to use heuristics or intuition in their lending decisions.
Although heuristic is a form of managerial skill that requires years of
training and experience, it could also lead to serious and systematic errors
when applied to situations in which they are inappropriate. Bank managers
should therefore be educated on the thorough understanding of heuristics so
that they are not bias in their decisions regarding loan applications from
small businesses.
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Successful
International Issuance Major Legal and Documentary Aspects of International
Debt and Capital Markets
Paul Mon
The purpose of this article is to give a brief overview of
the important factors which come into play when an issuer is contemplating an
issue of debt securities in the international capital markets. Some of these
factors are within the control of the issuer itself (for example, the
contractual terms of the issue and the efficacy of the due diligence process)
whereas others (such as withholding tax and exchange control) reflect the
regulatory regime of the issuer's own jurisdiction. The author does not presume
to understand the detailed workings of Malaysian law and regulation and
therefore the thoughts given are of necessity general in their nature but have
been compiled as a result of many years? experience advising underwriters and
issuers in a number of countries in Asia and elsewhere.
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