Does finance lead or lag growth? evidence from Malaysia

Fadzlullah Salleh and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: Finance has played a significant role in the process of economic growth. There have been many attempts to shed light on the direction of Granger-causality between finance and growth for helping the policy makers. But the issue of direction of Granger-causality has remained unresolved. This paper is an attempt to revisit that issue as to whether finance leads or lags growth in a developing economy. The standard time series techniques are applied for the analysis. Malaysia is taken as a case study. The findings tend to indicate that finance lags growth at least in the context of Malaysia during the period under review. This finding has a strong policy implication in that the Government has to take a pro-active role to enhance the growth of the economy in order to develop the financial sector..

Keywords: Finance; growth; lead-lag; Malaysia (search for similar items in EconPapers)
JEL-codes: C22 C58 E44 (search for similar items in EconPapers)
Date: 2016-06-18
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