THE ROLE OF FINANCIAL DEVELOPMENT ON INCOME INEQUALITY IN MALAYSIA

This study examines the role of financial development in influencing income inequality in Malaysia over the period of 1980-2000. The empirical results based on ARDL bounds test indicate that financial market development is, at best, very weak and statistically insignificant in reducing income inequality in Malaysia. The evidence is valid for a variety of financial indicators, including the banking sector, the stock market and financial aggregate variables. The evidence also highlights that besides various government¡¯s development programs, efforts should also concentrate on improving institutional quality, economic development and maintaining low inflation in its attempt to combat income inequality.Banking Sector, Capital Market, Financial Development, Income Inequality, ARDL Bounds Test

Technology transfer, FDI and economic growth in the ASEAN region

The aim of this study was to investigate the intensity of international technology transfer in selected ASEAN economies through import of machinery and foreign direct investment. The technology transfer intensities across the ASEAN economies vary substantially, with Singapore leading among the four selected economies, followed by Malaysia, Thailand, and Indonesia. The intensities of foreign direct investment (FDI) inflows into the region is closely related to the levels of technology transfer to the region. It is observed that the Asian financial crisis did alter the concentration of FDI inflows in these countries. The data also show that the ratios suffered a setback in the year after 1998. After this setback, both Malaysia and Singapore gained momentum again in attracting inflows of FDI, almost double the ratio of 1998. This indicates that Malaysia and Singapore were the most successful among the selected ASEAN countries in tapping the benefits of FDI and technological transfers with good strategies and policies. In contrast, Indonesia faced a continuing outflow of FDI since the crisis, yielding a negative impact on its economic activities. Among nations, Japan and the United States are the two dominant FDI providers for the ASEAN region, and they have contributed substantially in the transfer of technologies into the region

The effect of foreign currency borrowing and financial development on exports: a dynamic panel analysis on Asia-Pacific countries

This paper examines the effect of foreign currency borrowing and financial development on exports. A balanced panel data is constructed for the selected 17 East Asian-Pacific countries, and the cointegration relationship among the variables of the export demand function is verified using Pedroni's heterogeneous panel cointegration tests. The empirical results indicate that the effect of foreign debt on exports is conditional on the magnitude of currency depreciation. The larger the depreciation of a currency, the more its exports are adversely affected by its foreign liability. This finding might be a possible explanation as to why large exchange rate depreciation during the 1997 financial crisis failed to generate the export boom. The results also show different effects of financial shocks on exports in these economies

Value-added information in term structure: the case of Malaysian government securities

This study empirically examines the impact of value-added information in the risk premium on the predictability of longer maturity term structure about future short-term rates in Malaysian fixed income securities market. Regardless of the absence of a time-varying risk premium in the interest rate, the Generalized Method of Moment (GMM) results suggest that there is statistical evidence to support that the longer-term spread between long-term and short-term rates does have some significant power in predicting the changes in expected future short-term rate. This implies the stability of the short-term interest rates in Malaysia

Spatial integration in the broiler market in Peninsular Malaysia

The broiler sector in Peninsular Malaysia is marked by many structural elements of imperfect competition, particularly increasing vertical integration. This study adopts the Enders and Granger (1998) threshold autoregressive model to analyze market integration and pricing efficiency in the broiler sector. Results indicate that market integration exists in the broiler sector in spite of the structural rigidities that are present. However, asymmetries in price transmission are evident between the central market and regional wholesale markets

Education and growth in Malaysian knowledge-based economy

The Malaysian economy of today is in the process of evolving from a production-based economy (P-economy) into a knowledge-based economy (K-economy). In the theory of K-economy, knowledge is recognized as one of the primary factors in sustaining economic growth aside from land, labor and physical capital. In this study, we focus on formal education as a knowledge-based input in the Malaysian production function. 'The multivariate cointegration test result indicates that education, technical progress, labor, capital and economic growth of the country have a long-run equilibrium relationship, which allows them to elevate together over time. Even though several previous studies show that education might not contribute significantly to the growth of developing countries, our short-run estimated results, based on vector error-correction modeling, show that human capital, with the stock of knowledge accumulated through education, does contribute to Malaysian economic growth. In fact it can be considered as, based on the estimated production elasticities, the second most important input factor, alter physical capital, that promotes economic growth. This result provides empirical evidence that education, which is causally linked to the physical capital and technological progress, is an important mechanism to escalate the transformation of Malaysia into a fully-developed K-economy

Returns predictability of Malaysian bank stocks : Evidence and implications

The main objective of this study is to address the question of whether stock prices follow random walk all the time. Using the samples of four Malaysian bank stocks- Hong Leong Bank, Malayan Banking, Public Bank and Southern Bank, coupled with the Hinich and Patterson (1995) windowed-testing procedure, the results show that the series under study follow a random walk for long periods of time, only to be interspersed with brief periods of strong linear and non-linear dependency structures. Unlike previous studies, this paper provides a different perspective on the subject of random walk. In addition to that, several important implications drawn from the findings are also provided in the paper