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Does financial development cause economic growth in the ASEAN-4 countries

This paper empirically examines the short- and long-run finance-growth nexus during the post-1997 financial crisis in the ASEAN-4 countries (i.e., Indonesia,Malaysia, Thailand and the Philippines) by employing battery of times series techniques such as autoregressive distributed lag (ARDL) model, ve...

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Main Authors: Abd. Majid, M. Shabri, Mahrizal, ,
Format: Conference or Workshop Item
Language:English
Published: 2007
Subjects:
HG Finance
Online Access:http://repo.uum.edu.my/2435/1/M.Shabri.pdf
http://repo.uum.edu.my/2435/
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spelling my.uum.repo.24352011-02-21T12:46:39Z http://repo.uum.edu.my/2435/ Does financial development cause economic growth in the ASEAN-4 countries Abd. Majid, M. Shabri Mahrizal, , HG Finance This paper empirically examines the short- and long-run finance-growth nexus during the post-1997 financial crisis in the ASEAN-4 countries (i.e., Indonesia,Malaysia, Thailand and the Philippines) by employing battery of times series techniques such as autoregressive distributed lag (ARDL) model, vector error correction model (VECM), variance decompositions (VDCs) and impulseresponse functions (IRFs). Based on the ARDL models, the study documents a long-run equilibrium between economic growth, finance depth, share of investment and inflation. The study also finds that the common sources of economic progress/regress among the countries are price stability and financial development. Granger causality tests based on the VECM further reveals that there are: (i) no causality between finance-growth in Indonesia; the finding in favour of “the independent hypothesis” of Lucas (1988); (ii) a unidirectional causality running from finance to growth in Malaysia, thus supporting “the finance-growth led hypothesis” or “the supply-leading view”; (iii) a bidirectional causality between finance-growth in Thailand, the finding accords with “the feedback hypothesis” or “bidirectional causality view”; and (iv) a unidirectional causality stemming from growth to finance in the Philippines, the finding echoes with “the growth-led finance hypothesis” or “the demand following view” of Robinson (1952). Based on the VDCs and IRFs, the study discovers that the variations in the economic growth rely very much on its own innovations. If policy makers want to promote growth in the ASEAN-4 countries, priority should be given for long run policies, i.e., the enhancement of existing financial institutions both in the banking sector and stock market. 2007 Conference or Workshop Item NonPeerReviewed application/pdf en http://repo.uum.edu.my/2435/1/M.Shabri.pdf Abd. Majid, M. Shabri and Mahrizal, , (2007) Does financial development cause economic growth in the ASEAN-4 countries. In: International Economic Conference on Trade and Industry (IECTI) 2007, 3 - 5 December 2007, Bayview Hotel Georgetown, Penang. (Unpublished)
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutionali Repository
url_provider http://repo.uum.edu.my/
language English
topic HG Finance
spellingShingle HG Finance
Abd. Majid, M. Shabri
Mahrizal, ,
Does financial development cause economic growth in the ASEAN-4 countries
description This paper empirically examines the short- and long-run finance-growth nexus during the post-1997 financial crisis in the ASEAN-4 countries (i.e., Indonesia,Malaysia, Thailand and the Philippines) by employing battery of times series techniques such as autoregressive distributed lag (ARDL) model, vector error correction model (VECM), variance decompositions (VDCs) and impulseresponse functions (IRFs). Based on the ARDL models, the study documents a long-run equilibrium between economic growth, finance depth, share of investment and inflation. The study also finds that the common sources of economic progress/regress among the countries are price stability and financial development. Granger causality tests based on the VECM further reveals that there are: (i) no causality between finance-growth in Indonesia; the finding in favour of “the independent hypothesis” of Lucas (1988); (ii) a unidirectional causality running from finance to growth in Malaysia, thus supporting “the finance-growth led hypothesis” or “the supply-leading view”; (iii) a bidirectional causality between finance-growth in Thailand, the finding accords with “the feedback hypothesis” or “bidirectional causality view”; and (iv) a unidirectional causality stemming from growth to finance in the Philippines, the finding echoes with “the growth-led finance hypothesis” or “the demand following view” of Robinson (1952). Based on the VDCs and IRFs, the study discovers that the variations in the economic growth rely very much on its own innovations. If policy makers want to promote growth in the ASEAN-4 countries, priority should be given for long run policies, i.e., the enhancement of existing financial institutions both in the banking sector and stock market.
format Conference or Workshop Item
author Abd. Majid, M. Shabri
Mahrizal, ,
author_facet Abd. Majid, M. Shabri
Mahrizal, ,
author_sort Abd. Majid, M. Shabri
title Does financial development cause economic growth in the ASEAN-4 countries
title_short Does financial development cause economic growth in the ASEAN-4 countries
title_full Does financial development cause economic growth in the ASEAN-4 countries
title_fullStr Does financial development cause economic growth in the ASEAN-4 countries
title_full_unstemmed Does financial development cause economic growth in the ASEAN-4 countries
title_sort does financial development cause economic growth in the asean-4 countries
publishDate 2007
url http://repo.uum.edu.my/2435/1/M.Shabri.pdf
http://repo.uum.edu.my/2435/
_version_ 1644278234180747264
score 13.211869

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