Finance and other services sectors in Peninsular Malaysia, Sabah and Sarawak: Testing for stochastic convergence

Hirnissa, M.T and Habibullah, M.S. (2008): Finance and other services sectors in Peninsular Malaysia, Sabah and Sarawak: Testing for stochastic convergence.

Abstract

In the last four decades the financial services sector has becoming more important for the Malaysian economy. Despite gaining importance for enhancing economic growth, the contribution of the finance sector to the total services real GDP has been ranked second in Peninsular Malaysia, third in Sabah and fourth in Sarawak. The purpose of the present paper is to determine whether the contribution of the financial services sector in the three regions in Malaysia, namely Peninsular Malaysia, Sabah and Sarawak show any distinct pattern. In the jargon of economic development literature, we seek to determine whether there is “convergence” or similarity in the patterns of the performance of the financial services sector among the three regions. Generally, our results suggest divergence of the finance sector and other sub-sector of the services among the three regions.

• Item Type: MPRA Paper
• Language: English
• Keywords: stochastic convergence; peninsular malaysia; sabah; sarawak
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O18 - Urban, Rural, Regional, and Transportation Analysis ; Housing ; Infrastructure

References

Barro, R. (1991). Economic Growth in a Cross Section of Countries. Quarterly Journal of Economics, 106 (2), 407-443.

Barro, R., and Sala-i-Martin, X. (1991). Convergence across states and regions. Brookings Papers of Economic Activity, 1, 107-182.

Barro, R., and Sala-i-Martin, X. (1992). Convergence. Journal of Political Economy, 100, 223-251.

Barro, R., and Sala-i-Martin, X. (1995). Economic Growth. New York: McGraw-Hill.

Baumol, W.J. (1986). Productivity growth, convergence and welfare: What the long-run data show. American Economic Review, 76, 1072-1085.

Bencivenga, V. and Smith, S. (1991) „Financial intermediate and endogenous growth‟, Review of Economic Studies 58(2): 195-209.

Bernard, A.B. (1991). Empirical implications of the convergence hypothesis. Working paper. Stanford University: Center for Economic Policy Research.

Bernard, A.B., and Durlauf, S.N. (1995). Convergence in international output. Journal of Applied Econometrics, 10, 97-108.

Campbell, J.Y., and Mankiw, N.G. (1989). International evidence on the persistence of economic fluctuations. Journal of Monetary Economics, 23, 319-333.

Carlino, G.A., and Mills, L.O. (1993). Are U.S. regional incomes converging? A time series analysis. Journal of Monetary Economics, 32, 335-346.

Cellini, R., and Scorcu, A. (2000). Segmented stochastic convergence across the G-7 countries. Empirical Economics, 25, 463-474.

Cogley, T. (1990). International evidence on the size of the random walk in output. Journal of Political Economy, 98, 501-518.

DeLong, J.B. (1988). Productivity growth, convergence and welfare: Comment. American Economic Review, 78, 1138-1154.

Department of Statistics Malaysia. Statistical Yearbook, various issues.

Department of Statistics Malaysia. Sabah Statistical Yearbook, various issues.

Department of Statistics Malaysia. Sarawak Statistical Yearbook, various issues.

Dowrick, S., and Nguyen, D.T. (1989). OECD comparative economic growth 1950-1985: Catch-up and convergence. American Economic Review, 79, 1010-1030.

Dickey, D.A. and Fuller, W.A. (1981). Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica, 49, 1057-1077.

Elliot, G., Rothenberg, T.J. and Stock, J.H. (1996). Efficient test for an autoregressive unit root. Journal of Econometrics, 64, 813-836.

Evans, P. (1998). Using panel data to evaluate growth theories. International Economic Review, 39, 295-306.

Evans, P., and Karras, G. (1996). Convergence revisited. Journal of Monetary Economics, 37, 249-265.

Greasley, D., and Oxley, S. (1997). Time-series based tests of the convergence hypothesis: Some positive results. Economics Letters, 56, 143-147.

Greenwood, J. and Jovanovic, B. (1990) „Financial development, growth and the distribution of income‟, Journal of Political Economy 98: 1067-1107.

Grier, K.B., and Tullock, G. (1989). An empirical analysis of cross-national economic growth: 1951-1980. Journal of Monetary Economics, 24, 259-276.

Government of Malaysia. (1966). Seond Malaysia Plan 1966-1970. Kuala Lumpur: Government Printers.

Government of Malaysia. (2006). Five Malaysia Plan 2006-2010. Kuala Lumpur: Government Printers.

Kwiatkowski, D., Phillips, P.C.B., Schmidt, P. and Yongcheol, S. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of Econometrics, 54, 159-178.

Levine, R. (1991) „Stock markets, growth and tax policy‟, Journal of Finance 46: 1445-1465. Lewis, W.A. (1955) Theory of Economic Growth, London: Unwin University Books.

Lim, L.L., and McAleer, M. (2004). Convergence and catching up in ASEAN: A comparative analysis. Applied Economics, 36, 137-153.

Mankiw, G., Romer, P., and Weil, D.N. (1992). A contribution to the empirics of economic growth. Quarterly Journal of Economics, 107, 407-437

Nurkse, R. (1962) Problems of Capital Formation in Underdeveloped Countries, London: Blackwell.

Pagano, M. (1993) „Financial market and growth: an overview‟, European Economic Review 37: 613-622.

Phillips, P.C.B. and Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2): 335-346.

Quah, D. (1993). Galton‟s Fallacy and the tests of the convergence hypothesis. Scandinavian Journal of Economics, 95, 427-443.

Saint-Paul, G. (1992) „Technological choice, financial markets and economic development‟, European Economic Review 36: 763-781.

Schumpeter, J.A. (1934) The Theory of Economic Development, Oxford: Oxford University Press.

Skonhoft, A. (1995). Catching up and falling behind, a vintage model approach. Journal of Evolutionary Economics, 5, 285-295.

St. Aubyn, M. (1999). Convergence across industrialised countries (1890-1989): New results using time series methods. Empirical Economics, 24, 23-44.

World Bank. (1989) World Development Report 1989, Washington, D.C.: The World Bank.