nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2006‒11‒12
two papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Finance and growth in a small open emerging market By Law, Siong Hook; Azman-saini, W.N.W.; Smith, Peter
  2. Long-Run Relationship between Economic Growth and Stock Returns: An Empirical Investigation on Canada and the United States By Feridun, Mete

  1. By: Law, Siong Hook; Azman-saini, W.N.W.; Smith, Peter
    Abstract: This study contributes to the debate on financial development and economic growth in Malaysia using quarterly observations for a sample period from 1980 to 2002. It utilises a battery of financial indicators. Based on multivariate framework which takes real interest rate and capital stock into account, the findings are suggestive that finance does play a crucial role in promoting economic growth. Policymakers should, therefore, focus their attention on the creation and promotion of modern financial institutions including banks, non-banks, and stock markets in delivering both short- and long-run economic benefits.
    Keywords: financial development; economic growth; Malaysia
    JEL: O40 G20 O16 O11 G10
    Date: 2006–10
  2. By: Feridun, Mete
    Abstract: This article examines the long run relationship between economic growth and stock prices for Canada and the United States through cointegration estimation procedure, and it implements the Vector Error Correction Models (VECM) to abstract simultaneously the short- and long-run information in the modeling process. Results from the cointegration tests reveal that economic growth and stock prices share long run equilibrium relationship for both Canada and the U.S. The results from the VECM indicate that for the U.S., causality runs from economic growth to stock prices but not vice versa. However for Canada, the results reveal that there is a bi-directional causality between economic growth and stock prices.
    Keywords: stock returns; interest rates; economic growth; Canada; the United tates S
    JEL: E0
    Date: 2006–03

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