تاثیر توسعه مالی، پول و هزینه های عمومی بر درآمد اسمی مالزی: یک مطالعه اقتصادی سنجی

The objective of this paper is to estimate an econometric model for analyzing the impact of financial development, money, and public spending on Malaysian national income. Selection of variables is made in accordance with the literature on financial sector development and economic growth and the monetarist and Keynesian views on the relative effectiveness of monetary and fiscal policy. After determining the time series characteristics of the dataset, a vector error-correction model (VECM) is estimated. The results show an unambiguous support for the ‘supply-leading’ view of financial development, implying the importance of financial sector development in Malaysia. The findings provide some support for the McKinnon–Shaw repressionist proposition. But there is no noticeable support either for the monetary policy or for the fiscal policy effectiveness in case of Malaysia.

Malaysia is an example of an economically impoverished nation achieving remarkable economic success in a relatively short period of time. There exists an enormous theoretical literature on the temporal behavior of income and output spanning such areas as macroeconomic modeling, public finance, monetary economics, international trade, and development economics. Due to its spectacular performance, Malaysia presents an excellent case for evaluating the relevance of this literature to Malaysia. More precisely, this paper examines the relevance of (1) supply-leading role of financial development, (2) repressionist view on financial liberalization, and (3) monetarist-Keynesian views on money, public expenditure and economic growth. To the best of author’s knowledge, no attempt has been made to estimate an inclusive model for testing the relevance of these propositions to the Malaysian case. The results of this study are expected to shed some light on the Malaysian macroeconomic dynamics. These insights may prove useful to other developing countries in formulation of their own goal-consistent set of policies.

The main objective of this paper was to examine the importance of financial sector development, money supply, and government expenditure in explaining the stellar performance of the Malaysian economy. Malaysia experienced a high degree of macroeconomic stability over the period 1960–1996, a condition considered essential for a successful financial liberalization. The success of Malaysian financial liberalization can also be attributed to its correct sequencing, i.e., trade liberalization preceding financial liberalization. After conducting stationarity test and test of cointegration, a five-variable error-correction model was estimated. The results from the impulse response functions, and variance decompositions provided an unambiguous support for the ‘supply-leading’ view of financial sector development. This conclusion was further supported by the statistical significance of the error-correction terms. There was some support for the McKinnon–Shaw repressionist proposition. But there was no evidence to support either monetary or fiscal policy effectiveness. Even though these results have been obtained from a multivariate model, they should be treated with some degree of caution. Despite inclusion of five variables, the model is not comprehensive enough. Similarly, the use of annual data might have concealed the true nature of these relationships which only a high frequency data could have revealed.