International Journal of Academic Research in Accounting, Finance and Management Sciences

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Volume 7 Issue 1 (January, 2017)

Abstract

This study is on financial reporting in Small and Medium Enterprises (SMEs) in Nigeria: challenges and options. The study was carried out to determine the challenges facing Small and Medium Enterprises (SMEs) in adopting effective financial accounting reporting in Nigeria and to ascertain the contribution of poor credit facilities to inadequate accounting records in SMEs in Nigeria. Survey method and time series data were used and data were collected through the use of questionnaire and CBN statistical bulletin. Data generated were analyzed with simple percentage table. The study found that the challenges facing SMEs in preparation and presentation of financial reports are: inadequate accounting books and records, manpower, accounting system and non-running their transactions through the banking system. The study recommends among others that since keeping proper books of account and preparation of financial records can only be done by professional accountants, the two main bodies in Nigeria: ICAN and ANAN should encourage their members to offer free professional service to SMEs in Nigeria.

Keywords

Financial reporting, small and medium enterprises, challenges and options

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2534
Working Capital Determinants for the UK Pharmaceutical Companies Listed on FTSE 350 Index
Author(s): Mubashir QURASHI, Muhammad ZAHOOR      Pages: [11-17]
Abstract

The study is conducted to investigate working capital determinants for the UK Pharmaceutical companies that are the constituents of FTSE 350 index. Secondary data is collected through annual reports and DataStream database for the UK Pharmaceutical firms since 2009 to 2014. Panel data method is used and OLS is employed as an estimation tool. Working capital is the dependent variable while firm size, profitability, leverage, operating cycle, growth and level of economic activity are independent variable. The result of multiple regression show highly significant results. Working capital is negatively linked with firm size while positively linked with growth and level of economic activity for UK Pharmaceutical firms. Furthermore, insignificant results of working capital with operating cycle, profitability and leverage are observed.

Keywords

Working capital, liquidity, profitability, operating cycle and economic activity

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2535
Roles of Foreign Investment of the Banks in Jordan on Local Assets
Author(s): Ghazi Abdulmajeed ALRGAIBAT      Pages: [18-25]
Abstract

Jordan was Successful bringing for foreign investment (banks) that gave the facilities to play in economical development, particularly financial performance in lending and savings, so that the local banks (Jordan) has benefited from the presence of these windows in her community, so contrary the establishing of these banks in growing countries like Jordan and involving its with the local banks has a positive impact in taking advantages of the experiences banks (foreign branches in Jordan) in the areas of competition, lending mechanisms, utilize, how these banks (foreign) able to be characterized by financial and administrative performance within a short period to enter the market and the open local and international windows for our local banks. Here comes the importance of talking about the financial performance of foreign banks in Jordan and what are the rules that worked on those banks that got what it got from advanced centers in the world as a whole in the field of economic banking.

Keywords

Number, foreign banks, Jordan, local assets

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2536
The Compatibility of (GFMIS) with the Internal Control System
Author(s): Mohammad Naser Musa HAMDAN      Pages: [26-40]
Abstract

This study aimed at showing the compatibility of (GFMIS) with requirements of the Internal Control System (ICS). The study problem is searching in the compatibility of (GFMIS) to achieve requirements of (ICS) (control environment, risk assessment, control activities, information and communication and monitoring). The community of the study is from the Jordanian governmental sector. (160) questionnaires are distributed to the internal auditor working in such organizations. (147) questionnaires are valid to be analyzed. The study revealed that (GFMIS) is moderately consistent with the requirements of (ICS), in general. The study recommends to develop (GFMIS) in accordance with the (ICS) international standards. From other hand, the study recommends that not only the traditional control is interested in, but also increasing interest in risk control and adopting a system that provides financial and accounting information required checking and assessing the optimal use of available resources.

Keywords

Government Financial Management Information System (GFMIS), Internal Control System (ICS

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2537
Abstract

Social Enterprise is a fast emerging discipline that generates social impact through an entrepreneurial approach. This study examined social enterprise and its contribution on economic growth. The theoretical analysis provides that social enterprises are essential for economic growth and play a significant contribution in local economies through job creation, improving quality of life for the local people and provision of valuable social services. The potential of social enterprises to contribute to economic growth depends on broader system of different layers in the society to influence and increase impact as change agent. Therefore, social enterprises should be included into economic processes such as in doing business, in economic policy making and in financial policy. However, a number of basic policy and legal measures are necessary to create an appropriate environment for social entserprise development that can improve the impact of social entrepreneurship in the society. The principle requirement is to create a favorable legal context which treats social enterprises similar to business organizations.

Keywords

Entrepreneurship, social enterprise, economic growth, policy recommendations

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2538
The Impact of Electronic Banking Services on the Customers Loyalty of Commercial Banks in Jordan
Author(s): Sulieman Ibraheem Shelash AL- HAWARY, Ahlam Jebreen Ahmad HUSSIEN      Pages: [50-63]
Abstract

The study aimed to examine the impact of Electronic banking services on the customers’ loyalty of commercial banks in Jordan. The Electronic banking services represented by (ease of use, usefulness, cost of use, web site design, Privacy and accessibility). The population of the study consisted of customers of commercial banks in the North region of Jordan which are (Cairo Amman Bank, The Housing Bank for Trade and Finance, Ahli Bank, Bank Al-Etihad, Bank of Jordan, Arab Bank), a random sample was taken amounted (400) participants, SPSS version17, was used to examine the study hypotheses and achieve its objectives. The study found that there is statistical significant impact of the Electronic banking services (Ease of use, usefulness, Web Site Design, privacy) on Customers loyalty of commercial Banks in Jordan. Regarding the dimension of Accessibility, the study indicates that it had insignificant impact on Customers loyalty. The researchers recommend the use of specialists in the field of electronic sites design in particular, because the site attractiveness needs experience sufficient experience in this area to support its attractiveness for customers, and to benefit from the experiences of the developed countries in the field of software technology control and protection of customer information, in order to strengthen current Software applied to those banks.

Keywords

Electronic banking service, customers’ loyalty, commercial banks, Jordan

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2539
Abstract

Knowledge sharing and Innovation important topics at this century because all organizations lead employee to create new ideas also, transfer knowledge to increase performance interaction. This research paper examine the critical academic work in each streams of inquiry, the significance of knowledge management and its tie-in to innovation activities is broadly mentioned through focusing on knowledge sharing dimension IT support, organizational culture, empowerment leaders, rewards and its link with organizational innovation activities is widely acknowledged about new Tec, new market share, new stockholder and administrative innovation. This research paper work to propose theoretical model based factors derived from taxonomies by data collection from the second information collection via using literature review to make critical review. This paper recommends the organizations to adoption factors of knowledge sharing as a positive way to achieve innovation and competitive advantage.

Keywords

Knowledge, knowledge sharing, process of innovation, technology

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2540
The Role of Financial Analysis Tools in Granting Loans. Field Study on Banks Operating within Aqaba Special Economic Zone)
Author(s): Mousa Mohammad Abdullah SALEH, Laith Ahmad Mohammad ALKASASBEH, Ahmad Ahed BADER      Pages: [75-85]
Abstract

This study aimed to demonstrate the role of financial analysis tools in making decisions of granting loans to the clients in Jordanian commercial and Islamic banks operating in Aqaba Special Economic Zone. The study concluded that the bank credit departments at these banks rely on the tools and techniques of financial analysis when receiving customer requests and sorting it for the granting of credit. However, the role of the bank credit departments at these banks is not enabled as required and is dominated by marketing nature more than credit standing, where its role is limited to promoting banking services through receiving client requests, sorting and sending them to main centers concerned with making granting loans decision. The study has recommended the necessity of activating the role of these sections as well as developing the staff skills of those sections to use financial analysis tools and giving credit departments at banks operating within Aqaba Special Economic Zone the necessary authorities to make decisions to grant customers credit through the application of financial analysis methods. Moreover it is necessary to stimulate and encourage the credit department's staff in these banks by giving them bonuses and rewarding their dedication and their honesty, which will enhance the mutual trust between departments' staff and the managers in these banks.

Keywords

Credit decision, Financial Analysis Methods, Financial Ratios, Granting Loans

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2541
Monetary Policy Tools and Inflation in Kenya
Author(s): Nathan M. MUTWIRI      Pages: [86-97]
Abstract

Inflation is a critical aspect of every economy and presents a balancing act to most governments through regulatory framework. Inflation can break or break the economy of a nation. Hence policy makers in the government regulating bodies spend considerable time in developing policies aimed at achieving set targets of inflation which are geared to supporting the broader economic objectives of an economy. The Central Bank of Kenya (CBK) has responsibility of formulating and implementing monetary policy to achieve and maintain low inflation. This study set to establish the relationship of monetary policy tools and inflation in Kenya.. The study used time series empirical data on the variables to describe and examine the relationships between monetary policy tools and inflation. The study obtained secondary data on Price Index for inflation, 91-day Treasury bill rate, exchange rate, money supply (M3)and repo rate for a period of five year (2008- 2012). Analysis on the various variables obtained coefficients of correlation denoted as ‘?’ which shows the strength of relationship between monetary policy tools and inflation in Kenya. The study established that inflation and the money supply were positively correlated with each other. The study established that the general level of prices increase with the increase of money supply. The study found that the 91 treasury bill rates have an impact on the level of inflation. The findings of study show that the policy makers need critically evaluate and monitor the levels of money supply in Kenya so as to ensure a stable retail price levels. The findings also support the use 91-day Treasury bills rate in monitoring the level of prices because it has a significant effect on the level of Inflation in Kenya.

Keywords

CBK, CBR, CRR, CPI, GDP, KNBS, MPC, OMO

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2542
Specifying the Determinants of Brand Value by Using AHP Method
Author(s): Ilkut Elif Kandil GOKER, Tayfun ARAR      Pages: [98-106]
Abstract

Recently, the most successful companies in the world display the importance of knowledge based economy. The transformation from industrial economy to knowledge based economy highlights value added of intangible assets to the companies. Brand as a worthwhile intangible asset constitutes a substantial part of firm value. However lots of studies conducted to measure brand’s value solely. There hasn’t been generally accepted brand valuation model yet. In this paper it is aimed to present the most important factors in measuring brand value based on the Analytic Hierarchy Process. According to the expert team’s responses to our questionnaire the financial and behavioral factors which can affect brand value were found and prioritized. As a result it is determined that the most important factor in brand valuation in the frame of main criteria is Investment in Brand with 0,47 while in general; it is RandD Costs with 0,1893 and Takeover Costs with 0,1852 as the second. On the other hand, Rise in Ratio of Price/Sale and Rise in Net Sales are not considerably important with weights less than 1% on brand valuation.

Keywords

Brand value, brand valuation, Analytic Hierarchy Process (AHP), Consumer Based Brand Valuation, Financial Based Brand Valuation

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2574
A Theoretical Discussion of Internal Audit Effectiveness in Kuwaiti Industrial SMEs
Author(s): Awn Metlib AL- SHBAIL, Turki A. A. TURKI      Pages: [107-116]
Abstract

This paper aims to scrutinise the association between the internal audit effectiveness and the four factors associated with International Standards for Professional Practice of Internal Auditing (ISPPIA): independence of internal auditors, scope of internal auditors, management support, and audited cooperation. The relationship between these factors and Satisfaction of internal auditors is also examined. Further, the moderating effect on the relationship between these factors (if present) and the effectiveness of IA among industrial SMEs in Kuwait are investigated through satisfaction of internal auditors. By ascertaining the effectiveness of IA at the industrial firms via theories as well as variables, this paper broadens the available literature on the effectiveness of IA.

Keywords

Internal audit effectiveness, satisfaction of internal auditors, Kuwaiti Industrial SMEs

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2577
Fiscal Policy and Economic Growth: An Examination of Selected Countries in Sub-Saharan Africa
Author(s): Uche Boniface UGWUANYI, Okelue David UGWUNTA      Pages: [117-130]
Abstract

The debate on the effectiveness of fiscal policy as a tool for promoting growth and development remains inconclusive given the positions of economic theories as well as conflicting results of past studies. This study sought to determine the effect of fiscal policy variables on the economic growth of sub-Saharan African countries. The ex-post facto research design was adopted which enabled the study to make use of secondary data from sub-Saharan African Countries in a panel least squares. The result of the linearly modelled hypotheses tested using the panel data estimation technique under the fixed-effect assumptions revealed that Government productive and unproductive expenditures, distortionary tax (a proportional tax on output at rate) and non-distortionary taxes have significant effects on the economic growth of sub-Saharan African countries. Findings also revealed that budget balances of sub-Saharan African countries have a positive but insignificant effect on the economic growth of sub-Saharan African countries.

Keywords

Fiscal Policy, Economic Growth, Government Expenditure, Taxation, Fiscal Balances

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2587
Abstract

Thousands of people have been affected by major disasters in countries across the world over the last decades. Many governmental and non-governmental organizations participated in aid actions just after disasters. But, they could not prevent inabilities in taking action due to the magnitude of the disaster. Humanitarian aid organizations, like the others, should identify their targets and its priorities with selecting key performance measurements. Humanitarian logistics may use indicators based on both physical and non-physical dimensions. In this study, Balanced Scorecard approach is recommended as a suitable performance management system to develop and improve in managing of humanitarian aid logistics. This conceptual study contributes literature by proposing key performance indicators (KPI) for humanitarian logistics.

Keywords

Disaster, humanitarian logistics, balanced scorecard, KPI

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2588
Hospital Financing in Rural Ghana: Insight from Practitioners
Author(s): Charles ADUSEI      Pages: [138-143]
Abstract

Poverty magnifies the need for health care while at the same time shrinking the capacity to finance it. The purpose of this study was to identify the sources of finance available to hospitals in Ghana and challenges they face in access finance from these sources. Goaso Municipal hospital was purposively selected for the study. Questionnaire was used to solicit information from the respondents while descriptive statistics aided the data analysis. The study found that government subvention, National Health Insurance Claims and internally generated funds are the main sources of finance to the hospital. The study also revealed that the key challenges faced by the hospital with regards to financing are the delays in accessing National Health Insurance claim and government subventions. It is therefore recommended that National Health Insurance should reimburse the hospital promptly to improve the health care delivery. Moreover, the government must separate hospital financing from public spending via earmarked budgets to avoid annual public spending negotiations for government subventions.

Keywords

Hospital Financing, Sources Of Finance, Health Workers, Public Hospitals, Rural Ghana

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2589
The January Effect: Evidence from Four Arabic Market Indices
Author(s): Omar GHARAIBEH      Pages: [144-150]
Abstract

This study examines the existence of January effect in four Arabic market indices for the recent time period, February 1988 to May 2014. These market indices include Jordan, Egypt, Lebanon and Morocco. Using the OLS and GARCH (1, 1) approach, the results of this paper indicate that January returns provide positive profits and highly statistical significant, especially in Jordanian and Moroccan market indices. For the Egyptian and Lebanese market indices, the current study documents a large economic profit in January month. These results are useful to investors who can formulate their investment strategies accordingly. This study is the first to conduct a comprehensive January effect analysis of four Arabic market indices in an emerging stock market. The results of this paper support literature that indicates the presence of the January effect in market indices returns and it is still providing a serious challenge to the efficient market hypothesis.

Keywords

Efficient market hypothesis, January effect, monthly effect, Amman Stock Exchange (ASE)

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2590
Abstract

This paper examines the presence of momentum profits in the Arabic market indices for the period of January 1989 through August 2013. Also, momentum portfolios are divided into two components depending on past long-term performance produces early and late-stage momentum strategies. This paper confirms that the momentum profits are present and they are statistically or economically significant in 10 Arabic market indices over all formation periods. Thus, to reap the benefit of such profit opportunities, an investor has to sell and buy a past short-term loser portfolio and short-term winner portfolio, respectively. In regard to the relative merits of the pure and both early and late-stage momentum strategies, the late-stage momentum method consistently generates stronger evidence of momentum. It appears that the late-stage momentum strategy utilizes past long-term performance to better identify those indices that are continuing the short-term performances, while the early-stage momentum strategy doesn’t provide any profits.

Keywords

Momentum Profits, Late-Stage, Early-Stage, Arabic Market Indices, Strategy

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2591
Abstract

Before a Member State can adopt the euro, it must fulfil certain economic and legal criteria. The economic convergence criteria are designed to ensure that a Member State's economy is sufficiently prepared for adopting the single currency and can integrate easily into the monetary regime of the euro area. Replacement of national currencies with the euro is a complex operation requiring numerous practical training – for example to provide guarantees that the national currency is withdrawn quickly, that prices of goods are properly converted and presented and that the population is well informed. All these preparations are based on a certain "scenario of transition to the single currency" adopted by the candidate country to the euro zone. Through this article we wanted to present an analysis of the convergence economic indicators of Romania and some countries of the European Union, based on data extracted from the Convergence Report in June 2016 and we presented the convergence program in 2016 -2019 regarding the monetary policy and the exchange rate.

Keywords

Convergence Criteria, Nominal Convergence, Real Convergence, Convergence Economic Indicators, Convergence Program, Monetary policy

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2612
Impact of Electronic Service Quality on Customers Satisfaction of Islamic Banks in Jordan
Author(s): Sulieman Ibraheem Shelash AL-HAWARY, Warda Fares AL-SMERAN      Pages: [170-188]
Abstract

The study aimed to study impact of Electronic Service Quality on Customers Satisfaction of Islamic Banks in Jordan. The Electronic Service Quality represented by (Reliability, Ease of use, Effectiveness, Web Site Design, privacy, and Responsiveness). The population of the study consisted customers of Islamic banks in the North territory of Jordan (Jordanian Islamic Bank, International Arab Islamic Bank), a random sample was taken amounted (300) participants, SPSS was used to examine the study hypotheses and achieve its objectives. The researcher found that there is statistical significant impact of the Electronic Service Quality (Ease of use, Web Site Design, privacy, and Responsiveness) on Customers Satisfaction of Islamic Banks in Jordan. Regarding the dimensions of reliability and effectiveness, the study indicates that they had insignificant impact on Customers Satisfaction. The researcher recommended the use of specialists in the field of electronic sites design in particular, because the site attractiveness needs experience sufficient experience in this area to support its attractiveness for customers, and to benefit from the experiences of the developed countries in the field of software technology control and protection of customer information, in order to strengthen current Software application to those banks.

Keywords

Electronic Service Quality, customers satisfaction, Islamic Banks in Jordan

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2613
Granger Causality Analysis between Inflation, Debt and Exchange Rate: Evidence from Malaysia
Author(s): Lim Chia YIEN, Hussin ABDULLAH, Muhammad AZAM      Pages: [189-196]
Abstract

Sweeping inflation across the globe and historical high domestic inflation that reached two digits in Malaysia in 1974. Also, warning from Wall Street Journal of growing domestic debt and newly defined external debt starting year 2014 call forth this paper to examine the dynamic relationship between inflation, external debt, domestic debt and exchange rate for Malaysia covering the period of 1960-2014. This article used exploratory data analysis, Johansen cointegration test, and Granger causality test. The exploratory data analysis show that domestic debt and external debt have a strong positive association with inflation, meanwhile a weak positive association between exchange rate and inflation. The cointegration test indicates that there is one long run relationship. In Malaysia, inflation found to granger caused domestic debt, exchange rate granger caused inflation, and domestic debt granger caused exchange rate. A unidirectional relationship found for external debt and exchange rate. In short run, external debt is influencing inflation significantly. Observing the heightening level of external debt by IMF redefinition, external debt caused exchange rate will then lead to inflation. In the long run, the exchange rate is influencing inflation significantly. Hence, policy makers need to formulate appropriate and prudent policy, especially in the high inflation period as the impact of exchange rate during inflation period will be stronger.

Keywords

Inflation, domestic debt, external debt, exchange rate, Malaysia

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2624
Abstract

The main aim of this study is to research the reasons of why academicians working in a university of Northern Cyprus use internet banking. According to research findings the most important elements on internet banking usage are “Using at all hours of the day, 7/24 access”, “Saving of time”, “Speed of transactions”, “Not waiting in front of the bank or ATM”, “Ease of use compared to branch banks”, “The ease of seeing all data about transactions”, and “Being satisfied with internet banking transaction system”. When elements in the scale are categorised into smaller groups called factors only one factor named as convenience is reported to have explanatory power on internet banking usage.

Keywords

Internet banking, perceptions of academicians, satisfaction, Northern Cyprus

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2625
Corporate Social Responsibility (CSR): A Conceptual and Theoretical Shift
Author(s): Tareq O. BANI-KHALID, Ahmed H. AHMED      Pages: [203-212]
Abstract

The purpose of the present study is to trace the conceptual evolutionary path of theories and philosophies on Corporate Social Responsibility (CSR) and to reflect on the implications of the development. The study reported a conceptual shift with respect to CSR, as that concept was first appeared as Corporate Responsibility which was viewed as an implicit relationship between organizations and its society. The study also found a shift with respect to philosophical underpinning the engagement on CSR practices. Furthermore, the study revealed a great shift in focus throughout the years from profit maximization being the exclusive objective of business organisations to social and environmental practices being integrated within companies’ operations. The findings help provide more understanding of how this area of research is moving forward. The results should, therefore, be of interest to regulators and standard-setters charged with developing regulations to control CSR, as these practices are still voluntary in nature by companies.

Keywords

CSR, Conceptual Shift, Theoretical And Philosophical Development

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2626
Some Significant Macroeconomic Evolutions at the End of 2016
Author(s): Constantin ANGHELACHE, Alexandru MANOLE, Madalina-Gabriela ANGHEL, Emilia STANCIU, Alexandru URSACHE      Pages: [213-224]
Abstract

In this paper, the authors describe the core evolution of Romania’s national economy. The main indicator taken into consideration is the Gross Domestic Product and the analysis is focused on the overall evolution of this measure, the dynamics as influenced by the categories of resources, the impact of the utilization categories, the formation of GDP depending on ownership forms – public and private. Other aspects evaluated are the direct foreign investments (as measure of the attractiveness of the Romanian economy), the indices of production in industry and agriculture (as measures of the performance of the industry and agriculture sectors), the investments in constructions (emphasized as one of the factor of economic growth before 2008) and the production of services (the services are an important factor of the Romanian economy.

Keywords

Gross Domestic Product, resources, evolution, investments, industry, agriculture

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2627
Monetary Policy Inclusive Growth: Empirical Evidence from Malaysia
Author(s): Lim Chia YIEN, Hussin ABDULLAH, Muhammad AZAM      Pages: [225-235]
Abstract

The static growth of foreign direct investment since 2006 and current growth per capita of 3.11% in 2015 about 4.89% in 1980 spark a growing interest in the role of monetary policy. The unexplored causal relationship between monetary policy, unemployment, foreign direct investment and economic growth in Malaysia represents a zone of the request, as it could spell issues for these countries in their arrangement in accomplishing growth per capita. This study plan to examine the dynamic relationship between monetary policy and economic growth for Malaysia during 1980-2015. It contended that presence of the structural break in the data generating process prompts to size distortion and false conclusion in the ADF model (Perron, 1989 and Lee and Strazicich, 2003). Henceforth, this study begins with testing for stationarity properties which consider structural breaks notwithstanding the conventional ADF test. We agree with the monetarist that changes in the money supply do not affect real variables over the long haul as no evidence of causality from inflation to output nor any causality from money supply to price level from this study. Instead of the money supply, results from VAR Granger Causality found that interest rate observed to granger caused growth per capita, money supply, inflation, unemployment and foreign direct investment. This study demonstrates that changing approach of monetary policy in Malaysia from monetary targeting to interest rates targeting, in fact, a fruitful execution. We found evidence of bidirectional causality between unemployment and growth per capita in this study also in line with Mohd Noor et al., (2007). Here, we propose that Malaysia needs to elevate foreign direct investment in term of expanding growth per capita as upheld by the result of VAR granger causality where foreign direct investment found to granger caused unemployment and growth.

Keywords

Monetary policy; Economic Growth; causality; structural break; VAR; Malaysia

Full Text :PDF DOI: 10.6007/IJARAFMS/v7-i1/2634