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Financial Liberalization, Financial Sector Development And Growth: Evidence From Malaysia

  • James B. Ang

    ()

  • Warwick J. McKibbin

    ()

The objective of this paper is to examine whether financial development leads to economic growth or vice versa in the small open economy of Malaysia. We argue that the results obtained from cross-sectional studies are not able to address this issue satisfactorily and highlight the importance of country specific studies. Using time series data from 1960 to 2001, we conduct cointegration and various causality tests to assess the finance-growth link by taking saving, investment, trade and real interest rate into account. Contrary to the conventional findings, our results support the view that output growth causes financial depth in the long-run.

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File URL: http://cbe.anu.edu.au/research/papers/camawpapers/Papers/2005/Ang_McKibbin_52005.pdf
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Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2005-05.

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Length: 32 pages
Date of creation: May 2005
Handle: RePEc:een:camaaa:2005-05
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