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Are Financial Sector Policies Effective in Deeping the Malaysian Financial System

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Author Info
James B. Ang

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Abstract

This paper provides an empirical assessment of the effects of financial sector policies on development of the financial system in Malaysia over the period 1959-2005. The technique of principal component analysis is used to construct a summary measure of interest rate policies in order to account for the joint influence of various interest rate controls imposed on the Malaysian financial system. The results show that economic development, interest rate controls and capital liquidity requirements positively affect the level of financial development. However, higher statutory reserve requirements and the presence of directed credit programs appear to be harmful for development of the Malaysian financial system. The results provide some support to the argument that some form of financial restraints may help promote financial development.

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File URL: http://www.degit.ifw-kiel.de/papers/degit_12/C012_031.pdf
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Publisher Info
Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c012_031.

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Length: 21 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:deg:conpap:c012_031

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Related research
Keywords: Financial development; financial liberalization; Malaysia;

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Find related papers by JEL classification:
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Panicos O. Demetriades & Kul B. Luintel, 1997. "The Direct Costs Of Financial Repression: Evidence From India," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 311-320, May. [Downloadable!] (restricted)
    Other versions:
  2. Shandre M. Thangavelu & Ang Beng Jiunn & James, 2004. "Financial development and economic growth in Australia: An empirical analysis," Empirical Economics, Springer, vol. 29(2), pages 247-260, 05. [Downloadable!] (restricted)
  3. Ang, James B. & McKibbin, Warwick J., 2007. "Financial liberalization, financial sector development and growth: Evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 84(1), pages 215-233, September. [Downloadable!] (restricted)
    Other versions:
  4. Schwarz, Anita M., 1992. "How effective are directed credit policies in the United States? A literature survey," Policy Research Working Paper Series 1019, The World Bank. [Downloadable!]
  5. Kim, Daesik & Santomero, Anthony M, 1988. " Risk in Banking and Capital Regulation," Journal of Finance, American Finance Association, vol. 43(5), pages 1219-33, December. [Downloadable!] (restricted)
  6. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July. [Downloadable!] (restricted)
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  7. Arestis, Philip & Demetriades, Panicos O, 1997. "Financial Development and Economic Growth: Assessing the Evidence," Economic Journal, Royal Economic Society, vol. 107(442), pages 783-99, May. [Downloadable!] (restricted)
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  8. Inder, Brett, 1993. "Estimating long-run relationships in economics : A comparison of different approaches," Journal of Econometrics, Elsevier, vol. 57(1-3), pages 53-68. [Downloadable!] (restricted)
  9. Gennotte, Gerard & Pyle, David, 1991. "Capital controls and bank risk," Journal of Banking & Finance, Elsevier, vol. 15(4-5), pages 805-824, September. [Downloadable!] (restricted)
  10. Bewley, R. A., 1979. "The direct estimation of the equilibrium response in a linear dynamic model," Economics Letters, Elsevier, vol. 3(4), pages 357-361. [Downloadable!] (restricted)
  11. Thomas F. Hellmann & Kevin C. Murdock & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March. [Downloadable!] (restricted)
  12. Asli Demirguc-Kunt & Enrica Detragiache, 1998. "The Determinants of Banking Crises in Developing and Developed Countries," IMF Staff Papers, Palgrave Macmillan Journals, vol. 45(1), pages 3. [Downloadable!] (restricted)
  13. McKinnon, Ronald I & Pill, Huw, 1997. "Credible Economic Liberalizations and Overborrowing," American Economic Review, American Economic Association, vol. 87(2), pages 189-93, May. [Downloadable!] (restricted)
  14. Arestis, Philip, et al, 2002. "The Impact of Financial Liberalization Policies on Financial Development: Evidence from Developing Economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(2), pages 109-21, April. [Downloadable!] (restricted)
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  15. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ang, James, 2009. "Financial Liberalization Or Repression?," MPRA Paper 14497, University Library of Munich, Germany. [Downloadable!]
  2. James Ang, 2008. "Private Investment And Financial Sector Policies In Developing Countries," Monash Economics Working Papers 07/08, Monash University, Department of Economics. [Downloadable!]
  3. Ang, James, 2009. "Growth Volatility and Financial Repression: Time Series Evidence from India," MPRA Paper 14412, University Library of Munich, Germany. [Downloadable!]
  4. James, Ang, 2009. "Financial Liberalization and the Aid-Growth Relationship in India," MPRA Paper 14411, University Library of Munich, Germany. [Downloadable!]
    Other versions:
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