Financial Development and Economic Growth in Malaysia: The Stock Market Perspective
AbstractUnderstanding the causal relationship between financial development and economic growth is important in enhancing the economy of a nation. Using the autoregressive distributed lag (ARDL) bounds test approach, this study finds that stock market development is cointegrated with economic growth in the context of Malaysia. Moreover, this test also suggests that stock market development has a significant positive long-run impact on economic growth. Granger-causality test based on vector error correction model (VECM) further reveals that stock market development Granger-causes economic growth. Hence, this study provides robust empirical evidence in favor of finance-led growth hypothesis for the Malaysian economy.
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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0307010.
Date of creation: 23 Jul 2003
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Financial development; economic growth; cointegration; causality; stock market;
Find related papers by JEL classification:
- E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-07-29 (All new papers)
- NEP-FMK-2003-07-29 (Financial Markets)
- NEP-MFD-2003-07-29 (Microfinance)
- NEP-RMG-2003-07-29 (Risk Management)
- NEP-SEA-2003-07-29 (South East Asia)
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