TY - JOUR
T1 - Financial liberalization, financial sector development and growth
T2 - Evidence from Malaysia
AU - Ang, James B.
AU - McKibbin, Warwick J.
PY - 2007/9
Y1 - 2007/9
N2 - The objective of this paper is to examine whether financial development leads to economic growth or vice versa in the small open economy of Malaysia. Using time series data from 1960 to 2001, we conduct cointegration and causality tests to assess the finance-growth link by taking the real interest rate and financial repression into account. The empirical evidence suggests that financial liberalization, through removing the repressionist policies, has a favorable effect in stimulating financial sector development. Financial depth and economic development are positively related; but contrary to the conventional findings, our results support Robinson's view that output growth leads to higher financial depth in the long-run.
AB - The objective of this paper is to examine whether financial development leads to economic growth or vice versa in the small open economy of Malaysia. Using time series data from 1960 to 2001, we conduct cointegration and causality tests to assess the finance-growth link by taking the real interest rate and financial repression into account. The empirical evidence suggests that financial liberalization, through removing the repressionist policies, has a favorable effect in stimulating financial sector development. Financial depth and economic development are positively related; but contrary to the conventional findings, our results support Robinson's view that output growth leads to higher financial depth in the long-run.
KW - Financial development
KW - Financial liberalization
KW - Malaysia
UR - http://www.scopus.com/inward/record.url?scp=34248204524&partnerID=8YFLogxK
U2 - 10.1016/j.jdeveco.2006.11.006
DO - 10.1016/j.jdeveco.2006.11.006
M3 - Article
SN - 0304-3878
VL - 84
SP - 215
EP - 233
JO - Journal of Development Economics
JF - Journal of Development Economics
IS - 1
ER -