Does finance lead or lag growth? evidence from Malaysia

Salleh, Fadzlullah and Masih, Mansur (2016): Does finance lead or lag growth? evidence from Malaysia.

Abstract

Finance has played a significant role in the process of economic growth. There have been many attempts to shed light on the direction of Granger-causality between finance and growth for helping the policy makers. But the issue of direction of Granger-causality has remained unresolved. This paper is an attempt to revisit that issue as to whether finance leads or lags growth in a developing economy. The standard time series techniques are applied for the analysis. Malaysia is taken as a case study. The findings tend to indicate that finance lags growth at least in the context of Malaysia during the period under review. This finding has a strong policy implication in that the Government has to take a pro-active role to enhance the growth of the economy in order to develop the financial sector..

• Item Type: MPRA Paper
• Language: English
• Keywords: Finance, growth, lead-lag, Malaysia
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy

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