BANK, STOCK MARKET, AND ECONOMIC GROWTH IN MALAYSIA: AN EMPIRICAL STUDY

Abstract

This study examines the impact of bank development and stock market development on economic growth in Malaysia using time series data.The results of the long-run cointegrating vectors show that there is a long-run relationship between economic growth and its determinants. An increase in bank development or stock market development will lead to an increase in economic growth. Moreover, there is some evidence that stock market development is found to have a more influential impact on economic growth than bank development in the long run. The results of the error correction models show bank development and stock market development to have a significant impact on economic growth in the short run. Generally, bank development and stock market development are important to promote economic growth.