Reassessing The Stability of Broad Money Demand in Malaysia

This paper re-examines the money demand in Malaysia covering the period from 1974 to 2001, a period characterised by various events particularly the financial sector liberalisation, changes in monetary framework and currency crises. Our results support the existence of fairly stable long-run money demand function despite the various changes and developments in the economy. However, there is an evidence of instability in short-run money demand. On this ground, the monetary targeting framework in Malaysia seems to be appropriate at least in the 1990s and monetary aggregate continue to be a useful longer-term indicator in the formulation of monetary policy.money demand, cointegration, error-correction, Malaysia

SOURCES OF ASIAN CURRENCY CRISIS

This study examines the sources of currency crises in ASEAN. The empirical findings indicate that reserve inadequacy, increase of bank’s claims on private sector, deteriorating trade balance and misalignment of real exchange rate increase the probability of a speculative attack on a currency. The results also suggest that the currency crises could be contagious. The significant variables are closely related to the external factors and thus, indicate the openess of the ASEAN-4 economy. Hence, we could conclude that there is a linkage between the economic fundamentals and currency crises in ASEANcurrency crisis, Asian, probit

Predicting Output and Inflation in Less Developed Financial Markets Using the Yield Curve: Evidence from Malaysia

This paper investigates the role of the term spread to predict domestic output and inflation in less developed financial market with the focus on Malaysia bond market. By controlling for past values of the dependent variable, this paper finds that the term spread of various bond maturities contain relevant information about future output and inflation at short horizons. Besides that, we employ a probit model to assess the ability for the yield curve to predict future economic slowdown. The results suggest that the term spread has contributed significantly in the probability of predicting future economic slowdown. Despite the under-developed bond market, the findings point to the potential for bond yields to play a greater role in monetary analysis beyond conventional indicators. From the policy point of views, the results from our analysis suggest that there is a significant potential for incorporating more technical and model based approaches using the yield curve beyond the usual indicator analysis.Term spread, Forecasting, Monetary Policy, Malaysia

Measuring Monetary Conditions in A Small Open Economy: The Case of Malaysia

The paper explores the measurement of monetary condition in Malaysia to augment the existing monetary policy framework. As an open economy, Monetary Condition Index (MCI) and Financial Condition Index (FCI) are applicable to understand the monetary condition especially in the era of financial deregulation and liberalisation. The results obtained suggest that the index is most useful when the exchange market exhibits stable conditions, and would be a constructive tool in the simultaneous management of the foreign currency and domestic money markets. However, the frequent experience of instability caused by supply and demand shocks with persistent and large inertia in the economy complicates the practical use of MCI and FCI in Malaysia. While this approach obviously does not provide answers to every question and as a leading indicator for inflation, it nonetheless makes it possible to measure the monetary condition in the Malaysian economy.Monetary condition index, Monetary Policy, Malaysia

Market Structure and Competition in Emerging Market: Evidence from Malaysian Islamic Banking Industry

This paper investigates the market structure of Islamic banking industry in Malaysia during 2001-2005 and evaluates the degree of competition using the H-statistic by Panzar and Rosse (1987). The estimated H-statistics for the whole sample periods are positive ranging from 0.38 to 0.62 and the Wald test for the market structure of monopoly or perfect competition is rejected implying that the Islamic banks in Malaysia earned their revenue in the condition of monopolistic competition.Competition; Panzar-Rosse model; Islamic Bank; Malaysia; Market structure

Consolidation and efficiency: Evidence from non-bank financial institutions in Malaysia

This paper investigates the efficiency changes of finance and merchant banking institutions in Malaysia, during and post-consolidation periods by applying the non-parametric Data Envelopment Analysis (DEA). The evidence suggests that pure technical efficiency is more related to overall efficiency than scale efficiency. On average, 28.7% of finance and merchant banking institutions are operating at CRS, while the majority are scale inefficient. Our results from the Tobit regression analysis further confirmed that the level of equity capital is positively related with the level of efficiency gain. Financial institutions with higher ratio of loans to assets are related to higher level of efficiency. This might reflect the degree of market power exists in the loan markets compared to the other product markets with institutions developed their strategic niche within the market.Non-Bank Financial Institutions, Data Envelopment Analysis (DEA), Malaysia, Tobit

Microencapsulation of waste sunflower oil as natural self-healing corrosion agent for coating applications

Corrosion is a material's destructive attack in reaction to its environment. The extreme consequences of corrosion have become a worldwide issue. Corrosion triggers plant shutdowns, waste of productive energy, loss of product pollution, decrease of productivity and expensive maintenance due to this type of degradation. The effect of the physicochemical interaction due to corrosion can also endanger human safety and generates global issues and economic loss. Microencapsulation is defined as wall formation process where urea formaldehyde (UF) is attached with emulsified waste sunflower oil (WSO) to form a microcapsule. The microcapsules containing WSO were used as smart material to be embedded in epoxy coating known as self-healing coating which can be applied to mild steel. The self-healing coating is used to prevent corrosion that induced by the existence of micro-crack on the coating surface. The WSO was aimed to be encapsulated via in-situ polymerization method with main parameter of stirring speed, reaction time and surfactant concentration. The microencapsulated WSO was characterized by using Field Emission Scanning Electron Microscopy (FESEM), Energy Dispersive X-ray (EDX) and Fourier Transform Infra-Red Spectroscopy (FTIR). The rare coating technique called sandwich method is used in this study. MS3E5R3 (microcapsules with 300 rpm stirring speed, 5 wt%. of Ethylene Maleic Anhydride, EMA and 3 h reaction time) showed an optimum result of microencapsulation of WSO with smooth and spherical structure of 46 % of yield of microcapsules (Y), 48 % of microencapsulation efficiency (ME) and 66 % of core content (CC). The scratch on the coating matrix autonomously healed after five days and the corrosion rate was also reduced. CS3E5R3 (coating with 300 rpm stirring speed, 5 wt%. of Ethylene Maleic Anhydride, EMA and 3 h reaction time) showed the optimum result of self-healing performance and mechanical strength with 1.47 mm coating thickness, fully healed of healing category, 654.25 N/mm2 maximum stress on bending adhesion test, 6.14 HV of hardness and 83 μm of detachment length on scratch adhesion test. The coating matrix that containing WSO also showed the anti-corrosion ability. CS3E5R3 showed the optimum result of anti-corrosion ability with the lowest mass loss (0.02062 g), corrosion rate (0.0574 mm/yr). The corrosion rate of CS3E5R3 compared to reference sample showed 57 % reduction of rate. The unique morphology of corroded mild steel named lepidocrocite is the novel finding that has not been presented by any researcher involve in the investigation of selfhealing coating. This study revealed that the WSO as a new self-healing corrosion agent is viable self-healing corrosion agent to be microencapsulated. It can be concluded that microcapsules synthesized from a natural agent incorporated with recycling of waste oil could be very auspicious smart coating materials and beneficial for the advancement of corrosion control technology

Bank Efficiency and Share Prices in China: Empirical Evidence from a Three-Stage Banking Model

This paper examines for the first time the relationship between China banks’ efficiency and its share price performance. Our analysis consists of three parts. First, we calculate the annual share price returns of the banks for each year between 1997 and 2006. Then we employ Data Envelopment Analysis (DEA) Window Analysis method, first proposed by Charnes et al. (1985) to estimate the efficiency of the banks. Finally, we estimate the annual share price returns over the change in efficiency, while controlling for other bank specific traits. The empirical findings suggest that large China banks have exhibited higher technical and pure technical efficiency levels compared to their small and medium sized bank counterparts, while the medium sized banks have exhibited higher scale efficiency. The relationship between China banks’ efficiency and share price performance suggest that bank efficiency estimates derived from the DEA Window Analysis method contributes significant information towards share price returns beyond that provided by financial information.Bank Efficiency, Share Prices, DEA Window Analysis, China

Bank Ownership, Characteristics and Performance: A Comparative Analysis of Domestic and Foreign Islamic Banks in Malaysia

The paper investigates the performance of Malaysian Islamic banking sector during the period of 2001-2005. Several efficiency estimates of individual banks are evaluated using non-parametric Data Envelopment Analysis (DEA). Two different approaches have been employed to differentiate how efficiency scores vary with changes in inputs and outputs. The analysis links the variation in calculated efficiencies to a set of variables, i.e. bank size, ownership, capital, non-performing loans and management quality. The findings suggest that during the period of study, scale inefficiency dominates pure technical inefficiency in the Malaysian Islamic banking sector. We found that foreign banks have exhibited higher technical efficiency compared to its domestic peers. The second stage empirical results based on multivariate Tobit model also suggest that technically more efficient banks are larger, have greater loans intensity, and on average have less non-performing loans.Islamic Banks, Data Envelopment Analysis (DEA), Tobit Regression Analysis

The impact of monetary policy on Islamic bank financing: bank-level evidence from Malaysia

Purpose – This paper aims to examine the distributional differences of Islamic bank financing responses to financing rate across bank-specific characteristics in dual banking system. The study also aims to provide understanding of how efficiently Islamic banks perform their roles as suppliers of capital for businesses and entrepreneurs. Design/methodology/approach – The study uses panel regression methodology covering all Islamic banks in Malaysia. The study estimates the benchmark model for Islamic bank financing with respect to bank characteristics and monetary policy. Findings – The evidence suggests that bank-specific characteristics are important in determining Islamic financing behaviour. The Islamic financing behaviour is consistent with conventional lending behaviour that the Islamic bank financing operates depending on the level of bank size, liquidity and capital. There is no significant difference between Islamic bank financing and conventional bank lending behaviour with respect to changes in monetary policy. Originality/value – Many problems and challenges relating to Islamic financing instruments, financial markets and regulations must be addressed and resolved. In practice, it would be a good idea if Islamic banks move away from developing debt-based instruments and concentrate more efforts to develop profit and loss sharing instruments.Objetivo - Este documento tiene como objetivo examinar las diferencias de distribución de las respuestas de financiación de los bancos islámicos a la tasa de financiación a través de las características específicas de los bancos en el sistema de banca dual. El estudio también tiene como objetivo proporcionar una comprensión de la eficacia con la que los bancos islámicos desempeñan sus funciones como proveedores de capital para empresas y emprendedores. Diseño / metodología / enfoque - El estudio utiliza una metodología de regresión de panel que cubre todos los bancos islámicos de Malasia. El estudio estima el modelo de referencia para el financiamiento bancario islámico con respecto a las características bancarias y la política monetaria. Recomendaciones - La evidencia sugiere que las características específicas de los bancos son importantes para determinar el comportamiento financiero islámico. El comportamiento de la financiación islámica es coherente con el comportamiento de los préstamos convencionales que opera la financiación de los bancos islámicos en función del tamaño del banco, la liquidez y el capital. No existe una diferencia significativa entre el financiamiento de los bancos islámicos y el comportamiento de los préstamos bancarios convencionales con respecto a los cambios en la política monetaria. Originalidad / valor - Se deben abordar y resolver muchos problemas y desafíos relacionados con los instrumentos financieros islámicos, los mercados financieros y las regulaciones. En la práctica, sería una buena idea que los bancos islámicos dejaran de desarrollar instrumentos basados ​​en deuda y concentraran más esfuerzos en desarrollar instrumentos de distribución de pérdidas y ganancias