Title: BANK, STOCK MARKET AND ENVIRONMENTAL CONDITION TOWARDS ECONOMIC GROWTH. AN EMPIRICAL EVIDENCE IN MALAYSIA FROM 2000 TO 2009
Abstract: The study aims to examine the relationship between economic growth with banking system, stock market system, inflation, and interest rate in short run and long run. Effort is also taken to determine whether banking system is a complement or substitute to stock market system in influencing economic growth. The monthly secondary data ranging from 2000 to 2009 obtained from Bank Negara Reports, Malaysian Financial Report and Bursa Malaysia Reports were used. The Ordinary Least Square estimation results reveal that R-squared is high. F-test shows the data fits the model. But the estimated Durbin Watson value indicates that the data set has an autocorrelation problem. In Unit Root Test results, all the variables have a unit root problem at the level form, but the variables are found to be integrated at first order. Next, VAR(p) model determines that the optimal lag length of 1. Moreover, cointegration test shows that bank credit and market capitalization are found to be significant in affecting economic growth in long run while inflation and interest rate are insignificant. Bank credit is found to have negative and greater effect on the economic growth while market capitalization has the positive and less effect. Therefore, banking system acts as a substitute to stock market system in affecting economic growth. Furthermore, the result indicates that there is no short run relationship between dependent variable and independent variables in the Vector Error Correction model. Finally, the results from Impulse Responses Function and Variance Decomposition also support the findings. In conclusion, some recommendations and future study are discussed.
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: article
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