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Jurnal Ekonomi Malaysia

54 (1) 2020 19 – 32

Credit Card Usage and Inflation: A Case Study of a Small Open Economy
Penggunaan Kad Kredit dan Inflasi: Satu Kajian Kes Ekonomi Kecil Terbuka di Malaysia

Faculty of Economics and Administration
University of Malaya
50603 Kuala Lumpur
MALAYSIA

zoeywjr@gmail.com

Faculty of Economics and Administration
University of Malaya
50603 Kuala Lumpur
MALAYSIA

tangtuckcheong@um.edu.my

Abstract

This study examined the influence of credit card usage on inflation in a small open economy, Malaysia. The existing studies used money supply, and bank lending as the key monetary determinants of inflation in Malaysia. These two variables had also been re-examined separately for comparison purpose. Other macroeconomic variables were economic activity and imports. The paper employs The Autoregressive Distributed Lag (ARDL) approach using time series data with monthly observations over 1997-2017. The results of this study showed that the price level, the imports and economic activity were cointegrated. In the long-run, credit card usage was more elastic than bank lending. The economic activity remained the most elastic determinant of price level. In the short-run, bank credit growth, and money supply growth determine the inflation. Meanwhile, imports growth and economic growth did not influence the inflation. The past inflation rates were found to be informative to the current inflation. Hence, this study suggested that inflation in Malaysia was due to ‘too much financing’. This study also provided policy implications.

Keywords

bank credit; cointegration; credit card usage; inflation; money supply

Author’s Acknowledgement

We would like to acknowledge that this study is from the first author’s Graduation Exercise (EIA3005) Session 2017/2018 entitled “Does Too Much Money or Too Much Finance Cause Inflation in Malaysia?” for fulfilling the Bachelor’s Degree in Economics at the Faculty of Economics and Administration, University of Malaysia.

http://dx.doi.org/10.17576/JEM-2020-5401-2
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Wong, , & Tang, (2020). Credit Card Usage and Inflation: A Case Study of a Small Open Economy. Jurnal Ekonomi Malaysia, 54(1), 19–32. http://dx.doi.org/10.17576/JEM-2020-5401-2

@article{tang2020credit,
  title={Credit Card Usage and Inflation: A Case Study of a Small Open Economy},
  author={Wong, Zoey Jia Rou and Tang, Tuck Cheong},
  journal={Jurnal Ekonomi Malaysia},
  volume={54},
  number={1},
  pages={19—32},
 

year={2020},
}

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