Using P-Star Model to Linking Money and Prices in a Financial Liberalised Developing Economy: The Case

Using P-Star Model to Linking Money and Prices in a Financial Liberalised Developing Economy: The Case for Malaysia. MUZAFAR SHAH HABIBULLAH. Jurnal Ekonomi Malaysia 33 (1999)

Abstract
The P-Star approach of modelling inflation proposed by Hallman et al. has been widely tested in the United States and other developed countries. The applicability of the P-Star model for the developing countries is yet to be determined. The main prupose of the present study is to add to the current literature on the robustness of the P-Star model with respect to a developing country - Malaysia. Using a sample period from 1981:1 to 1994:4, our results suggest that Malaysian monetary data support the P-Star model. We conclude that there is a close relationship between money and the price level in Malaysia despite the occurences of financial liberalisation in the 1980s and 1990s.