IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Linkages Between the Real Sector and the Financial Sector: The Case of Malaysia

  • Siti Muliana Samsi

    ()

    (Faculty of Economics and Administration University of Malaya, 50603 Kuala Lumpur)

  • Zarinah Yusof

    (Faculty of Economics and Administration University of Malaya, 50603 Kuala Lumpur)

  • Kee-Cheok Cheong

    (Faculty of Economics and Administration University of Malaya, 50603 Kuala Lumpur)

Registered author(s):

    This paper aims to explore the dynamic interaction between the real sector and the financial sector in Malaysia during the period 1986:1 to 2011:4, a period in which the global crisis have been felt. The parsimonious error-correction model (PECM) is used to examine the significant role of financial variables on real output in the long-run as well as in the short-run. The findings suggest the existence of a long-term relationship between the real output and the financial sector. The causality tests reveal that the real output has strong relationships with the real estate and banking sector. From the PECM, the contribution of the banking sector is higher than that from other financial indices. The Kuala Lumpur stock exchange and the real estate contribute the same percentage to the output growth. Meanwhile, financial services accounted a small percentage to the output growth. This finding concludes that the better development in the banking sector stimulates GDP growth in Malaysia. Therefore, for sustainability of output growth, strengthening and establishing a well-developed banking sector is essential.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://web.usm.my/journal/aamjaf/vol%208-s1-2012/8-s1-5.pdf
    Download Restriction: no

    Article provided by Penerbit Universiti Sains Malaysia in its journal Asian Academy of Management Journal of Accounting and Finance.

    Volume (Year): 8 (2012)
    Issue (Month): Supp. 1 ()
    Pages: 93-113

    as
    in new window

    Handle: RePEc:usm:journl:aamjaf00811_93-113
    Contact details of provider: Web page: http://web.usm.my/aamj/

    More information through EDIRC

    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.:

    as in new window
    1. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
    2. Demetriades, Panicos O & Luintel, Kul B, 1996. "Financial Development, Economic Growth and Banker Sector Controls: Evidence from India," Economic Journal, Royal Economic Society, vol. 106(435), pages 359-74, March.
    3. Jaffe, Jeffrey F & Mandelker, Gershon, 1976. "The "Fisher Effect" for Risky Assets: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 31(2), pages 447-58, May.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. 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.
    6. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
    7. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
    8. James B. Ang, 2007. "Are Financial Sector Policies Effective In Deepening The Malaysian Financial System?," Monash Economics Working Papers 02-07, Monash University, Department of Economics.
    9. Favara, Giovanni & Giordani, Paolo, 2002. "Reconsidering the Role of Money for Output, Prices and Interest Rates," SSE/EFI Working Paper Series in Economics and Finance 514, Stockholm School of Economics.
    10. R. B. Johnston & Ceyla Pazarbasioglu, 1995. "Linkages Between Financial Variables, Financial Sector Reform and Economic Growth and Efficiency," IMF Working Papers 95/103, International Monetary Fund.
    11. Stanley Fischer, 1993. "The Role of Macroeconomic Factors in Growth," NBER Working Papers 4565, National Bureau of Economic Research, Inc.
    12. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
    13. repec:nbr:nberre:0126 is not listed on IDEAS
    14. Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
    15. Nelson, Charles R, 1976. "Inflation and Rates of Return on Common Stocks," Journal of Finance, American Finance Association, vol. 31(2), pages 471-83, May.
    16. Cevdet Denizer & Murat F. Lyigun & Ann L. Owen, 2000. "Finance and macroeconomic volatility," International Finance Discussion Papers 670, Board of Governors of the Federal Reserve System (U.S.).
    17. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
    18. Dovern, Jonas & Meier, Carsten-Patrick & Vilsmeier, Johannes, 2010. "How resilient is the German banking system to macroeconomic shocks?," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1839-1848, August.
    19. Bodie, Zvi, 1976. "Common Stocks as a Hedge against Inflation," Journal of Finance, American Finance Association, vol. 31(2), pages 459-70, May.
    20. Williams, Jonathan & Nguyen, Nghia, 2005. "Financial liberalisation, crisis, and restructuring: A comparative study of bank performance and bank governance in South East Asia," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2119-2154, August.
    21. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
    22. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    23. Aristeidis Samitas & Dimitris Kenourgios, 2005. "Macroeconomic factors’ influence on “new” European countries stock returns: the case of four transition economies," Finance 0512022, EconWPA.
    24. Kutan, Ali M. & Muradoglu, Gulnur & Sudjana, Brasukra G., 2012. "IMF programs, financial and real sector performance, and the Asian crisis," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 164-182.
    25. William Easterly, 2003. "National Policies and Economic Growth: A Reappraisal," Working Papers 27, Center for Global Development.
    26. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
    27. Lee, Bong-Soo, 1992. " Causal Relations among Stock Returns, Interest Rates, Real Activity, and Inflation," Journal of Finance, American Finance Association, vol. 47(4), pages 1591-603, September.
    28. Nidhiprabha, Bhanupong, 2011. "The Global Financial Crisis and Resilience of the Thai Banking Sector," Asian Development Review, Asian Development Bank, vol. 28(2), pages 110-132.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:usm:journl:aamjaf00811_93-113. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journal Division)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.