Determinants of the demand for banknotes in Malaysia a partial least equation (PLS) approach

• Main Author: Ghazari Amri, Sanusi
• Format: Thesis
• Language: English; English
• Published: 2014
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/4670/1/s810184.pdf; https://etd.uum.edu.my/4670/2/s810184_abstract.pdf; https://etd.uum.edu.my/4670/

The objective of this study is to investigate factors influencing the demand for banknotes in Malaysia. The factors examined are Gross Domestic Product (GDP), interest rates, inflation rates, exchange rates and market sentiments. Using data obtained from Bank Negara Malaysia, Malaysian Institute of Economic Research and Department of Statistics, Malaysia for the periods from Q1 2007 to Q2 2014 and analyzed using Partial Least Squares (PLS) method, the study found that, out of the five factors, only GDP and interest rates have significant influence on the demand for banknotes in Malaysia. The R2 value of 94% indicates that the five variables explain over 90% of the changes in the demand for banknotes in Malaysia. This study contributes to allowing Bank Negara Malaysia to predict more accurately the banknote demand behavior and consequently helps them to propose appropriate policy actions in order to manage the cash supply chains more efficiently