The Impact of Stock Market Development on Economic Growth in Malaysia

Chen, Pok Hau (2021) The Impact of Stock Market Development on Economic Growth in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

The aim of this research is to look into the effects of stock market development on Malaysian economic growth. This study adopted a time series data for 1990-2019 data to evaluate the results. There are many arguments about the effects of stock market expansion on expansion of economic in other country however it is limited study in Malaysia. Stock market development was examined using variables of Market Capitalization (MC), Turnover Ratio (TR), Government Consumption (GC) and Trade Openness (TO). The Autoregressive Distributed Lag (ARDL) approach was used in the study, and diagnostic testing was done before using the ARDL model. Other than that, Granger Causality test will also be implemented in this study to test the causality. The result showed that only MC and TR have bidirectional relationship with economic growth while others have unidirectional relationship. In long run growth, ARDL long run test showed that Government Consumption (LGC), Market Capitalization (LMC) and Turnover Ratio (LTR) has a positive association with growth of economy.