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Bank lending and economic growth in Malaysia: revisited


Tuck, Cheong Tang (2003) Bank lending and economic growth in Malaysia: revisited. Analisis, 10 (1). pp. 69-87. ISSN 0127-8983

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Abstract

The present study has re-investigated the role of bank financing on Malaysian economic development by using the bounds testing approach proposed in Pesaran, et al. (2001). This study had covered the annual periods from 1960 to 1998. The findings of the study are as follows. First, contrary to a previous study [Tang, 2000], it was found that there was no long run relationship between the volume of bank lending and the real Gross Domestic Product (GDP). Second, a long run relationship had been observed between real GDP, and volume of bank lending after including real exports variable into cointegration system. This finding clearly shows, the potential bias of omission variables in bivariate specification. An interesting outcome of the study is the suggestion that bank financing is strongly led by a country's economic development in the long run. The estimated elasticity is 3.02. The study suggests that in order to support a sustainable economic growth in Malaysia, bank financing for the private sector will be necessary.

Item Type: Article
Uncontrolled Keywords: bank lending, economic growth, long run relationship, unrestricted error correction model
Subjects: H Social Sciences > HG Finance
Divisions: UNSPECIFIED
Depositing User: Mrs. Norazmilah Yaakub
Date Deposited: 27 Jul 2010 07:33
Last Modified: 27 Jul 2010 07:33
URI: http://repo.uum.edu.my/id/eprint/315

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