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The linkages between household consumption and household debt composition in Malaysia

Ahmad Khan, Hafizah Hammad and Abdullah, Hussin and Samsudin, Shamzaeffa (2016) The linkages between household consumption and household debt composition in Malaysia. International Journal of Economics and Financial Issues, 6 (4). pp. 1354-1359. ISSN 2146-4138

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This study intends to examine the relationship between household consumption and household debt composition in Malaysia.Specifically, this study employs the Toda-Yamamoto non-causality test since it is suitable for variables with different levels of integration.Results obtained in this study suggest that the direction of causality runs from consumption to debt.Moreover, the result of the cointegration test also supports that long run relationship exists between the two variables. It also supports the Life Cycle Model, which predicts that a household has been borrowing in order to finance their consumption and expenses. Therefore, this result indirectly suggests that the household has been depending on debt to finance their consumption and thus any negative shocks that occur in the economy can causes serious consequences on the economic performance of the country.Hence, any attempts by policymakers to control the mounting debt level should be focusing on restricting the supply of loans.

Item Type: Article
Uncontrolled Keywords: Household Debt, Consumption, Causality, Cointegration, Malaysia
Subjects: H Social Sciences > HC Economic History and Conditions
Divisions: School of Economics, Finance & Banking
Depositing User: Dr. Hussin Abdullah
Date Deposited: 05 Jan 2017 01:21
Last Modified: 05 Jan 2017 01:21
URI: http://repo.uum.edu.my/id/eprint/20554

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