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Article

Open Access

Malaysian Stock Market: A Spur to the Country’s Economic Growth

Author(s)

Sabariah Nordin, Norhafiza Nordin, Wan Rozima Mior Ahmed Shahimi

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DOI:10.17265/1537-1514/2016.02.001

Affiliation(s)

Sabariah Nordin, Ph.D., School of Economics, Universiti Utara Malaysia, Sintok, Malaysia.
Norhafiza Nordin, Ph.D., School of Economics, Universiti Utara Malaysia, Sintok, Malaysia.
Wan Rozima Mior Ahmed Shahimi, lecturer, School of Economics, Universiti Utara Malaysia, Sintok, Malaysia.

ABSTRACT

This study empirically investigates the impact of stock market on Malaysian economic growth using a vector autoregressive (VAR) estimation technique and impulse response function (IRF) over the period of 1988 through 2012. The study is motivated by empirical findings that a well-functioning stock market plays an important role in enhancing economic growth in the developed countries. We find that Malaysian stock market exhibits a positive impact on economic growth. However, we find that the positive impact lasts only for a short period. Specifically, the effect only appears in the first year after the change in market size occurs. In the second year, the effect then starts to alleviate and completely diminishes after several years. The findings provide clear implications that the positive impact of stock market size changes should be fully utilized immediately once it is realized because the impact will not last long.

KEYWORDS

economic growth, impulse response function (IRF), stock market, vector autoregressive (VAR) estimation technique

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