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2003
(Issue No. 125)
Synopsis
Relationship
Between Money Supply and Output in Malaysia
by Choo Sook Yee & Yusuf Haji Othman
This paper examines the relationship between money supply and output in
Malaysia, using the cointegration approach and error correction model. In
Malaysia, monetary targeting has been the major monetary policy strategy.
Narrow money (M1) was the principal policy target up to 1970s before the
country adopted the broader aggregate, M2. In the 1980s, Bank Negara Malaysia
moved to focus on M3. However, by mid 1990s, BNM has shifted its policy
strategy from monetary targeting to interest rate targeting This study seeks to
shed some lights on whether BNM's initiatives to de-emphasise monetary
aggregate point to the fact that money does not affect output in Malaysia. The
empirical results suggest that a long-run relationship exists for all pairs of
series (M1 and real GDP and M2 and real GDP) except M3 and real GDP. The
Granger Causality Tests show that there is no bi-directional causation for M1
and real GDP. A unidirectional causality from real GDP to money supply is found
for M2 only. This implies that money is neutral during the study period and
supports the BNM shift away from monetary aggregate targeting. The findings
thus indicate that the past information on money supply (both M1 and M2) failed
to predict the future movement of output. This suggests that changes in money
supply via monetary targeting approach could not affect real GDP growth
statistically during the period of study.
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Do Bankers Understand the Needs of Small Business Owners?
by Dr Rosli Mahmood, Ghazali Ab. Rahman & Nora Azureen Abdul Rahman
This paper reports on a study that was conducted among bank managers and small
business owners to assess their understanding of bank selection criteria in the
lending process. The study also seeks to determine the importance of selected
factors perceived by both bankers and small business owners when determining
loans to small business customers. The findings reveal that differences exist
among bankers and small business owners in their relationship. The findings
also suggest that bankers do not really understand the needs of their small
business customers.
Ethics
After Enron
by Philip T N Koh
This is a reflective paper on the topical corporate governance issue of ethics.
The writer scrutinises the Enron debacle to showcase how ethics was relegated
to the sidelines, and the consequences of such a move. In a balanced
commentary, the writer, while highlighting the importance of ethics, also
reiterates that full implementation of ethical commitments may not be an overly
straightforward issue, but one that must be attempted at all costs.
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Behaviour
of Bank Customers During Satisfactory/ Dissatisfactory Encounters
by Ting Ding Hooi
This study attempts to look at customers?behaviour in satisfactory and
unsatisfactory encounters at their banks. Findings indicate that customers who
experience satisfactory encounters would tend to do more transactions with
their banks, tell their friends about their encounters, and continue
patronising their banks. On the other hand, dissatisfied customers would stop
their transactions with their banks, change banks, tell friends about their
dissatisfaction, and also tell the bank's authority about it. Further analyses
show that there exists a positively related relationship between satisfaction
and the overall quality of a bank.
Stated
Motivations for Share Buybacks in Malaysia
by Nasruddin Zainudin and Angappan Regupathi
Share buyback is a recent phenomenon in the Malaysian capital market. Since
1997, it has been allowed as a response to the Asian currency crisis to shore
up market share prices. This brief study explores companies?stated motivations
for undertaking share buybacks. It examines 40 companies?circulars to
shareholders, between October 1999 and May 2002, to identify the companies?
stated motivations for undertaking share buybacks. The study also detects
motivations that are the most stated, and those that appear to be accorded
greater emphasis. The findings indicate that out of the nine motivations for
share buybacks, four are hardly stated by companies. These include distribute
cash, issue stocks under ESOP, change capital structure, and anti-takeover
measure. The other five widely-stated motivations are to pay stock dividend,
investment opportunity, stabilise share price, use surplus cash, and increase
shareholder return/EPS.
Top
Rise
of Islamic Banking in Turkey
by Dr Hacer Saduman Okumus, Alfieya Hanuum Ridzwa & Dr Bala Shanmugam
This paper traces the growth of Islamic banking from a Turkish perspective.
While the growth may not have been phenomenal (relative to the Malaysian
experience) there nevertheless has been a surge in the usage of Islamic
financial instruments. The initial phase of growth was assisted by favourable
government policies. As Islamic banking moved towards maturity, special
regulatory privileges granted to Islamic banks were removed. Hence, these banks
are currently on equal footing with conventional banks and have to compete with
conventional business. The paper also undertakes a comparative analysis of the
performance of Islamic banks relative to conventional banks in Turkey.
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