ARE FINANCIAL SECTOR POLICIES EFFECTIVE IN DEEPENING THE MALAYSIAN FINANCIAL SYSTEM?

James B. Ang ()

No 02/07, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: This paper provides an empirical assessment of the effects of financial sector policies on development of the financial system in Malaysia over the period 1959-2005. The technique of principal component analysis is used to construct a summary measure of interest rate policies in order to account for the joint influence of various interest rate controls imposed on the Malaysian financial system. The results show that economic development, interest rate controls and capital liquidity requirements positively affect the level of financial development. However, higher statutory reserve requirements and the presence of directed credit programs appear to be harmful for development of the Malaysian financial system. The results provide some support to the argument that some form of financial restraints may help promote financial development.

Keywords: Financial development; financial liberalization; Malaysia. (search for similar items in EconPapers)
JEL-codes: E44 E58 O16 O53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-sea
Date: Written
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Related works:
Working Paper: Are Financial Sector Policies Effective in Deeping the Malaysian Financial System (2007)
Journal Article: ARE FINANCIAL SECTOR POLICIES EFFECTIVE IN DEEPENING THE MALAYSIAN FINANCIAL SYSTEM? (2008)
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