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Multivariate Granger causality and the dynamic relationship between health spending, income, and health price in Malaysia

Tang, Chor Foon (2010): Multivariate Granger causality and the dynamic relationship between health spending, income, and health price in Malaysia.

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Abstract

This study employs the Granger causality test within a multivariate cointegration and error-correction framework to investigate the relationship between health spending, income, and health price in Malaysia. This study covers the annual sample from 1970 to 2009. The main findings of this study are that in the short-run there is uni-directional Granger causality running from health spending and health price to income in Malaysia. While, in the long-run health spending, income and health price are bi-directional Granger causality. In addition, we also extend the study to examine the dynamic interaction between the variables in the system through the forecast error variance decomposition and impulse response function analyses. In line with the finding of Granger causality, all the variables behaved endogenously in the long-run. Thus, the variables are Granger-causes each other in the long-run even there might be deviations in the short-run.

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