Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia

In this paper, we examine the interrelations between bank lending, macroeconomic conditions and financial uncertainty for an emerging economy, Malaysia. Adopting time series techniques of cointegration, causality and vector autoregressions (VARs), we arrive at the following main results. We note lon...

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Main Authors:	Ibrahim, Mansor H., Shah Haneef, Sayed Sikandar
Format:	Article
Language:	English
Published:	Elsevier BV 2012
Subjects:	HG Finance
Online Access:	http://irep.iium.edu.my/28856/ http://irep.iium.edu.my/28856/ http://irep.iium.edu.my/28856/ http://irep.iium.edu.my/28856/1/Bank_lending%2C_macroeconomic_conditions_and_financial_uncertainty.pdf

id	iium-28856
recordtype	eprints
spelling	iium-288562013-02-15T07:52:03Z http://irep.iium.edu.my/28856/ Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia Ibrahim, Mansor H. Shah Haneef, Sayed Sikandar HG Finance In this paper, we examine the interrelations between bank lending, macroeconomic conditions and financial uncertainty for an emerging economy, Malaysia. Adopting time series techniques of cointegration, causality and vector autoregressions (VARs), we arrive at the following main results. We note long run positive relations between real output and both real bank credits and real stock prices. However, with slow adjustment of real output in responses to credit expansion or stock price increase and weak exogeneity of the latter two variables, both credits and stock prices can be persistently higher than their fundamental values. The phenomenon can be detrimental since it heightens market uncertainty. Our results suggest that heightened market uncertainty is negatively related to output in the long run and, on the basis of dynamics analysis, it is likely to depress real output, real credit and real stock prices. At the same time, we note significant dynamic impacts of interest rate shocks on other variables. Taken together, these results have important implications for macroeconomic performance and stability for the case of Malaysia. Elsevier BV 2012 Article PeerReviewed application/pdf en http://irep.iium.edu.my/28856/1/Bank_lending%2C_macroeconomic_conditions_and_financial_uncertainty.pdf Ibrahim, Mansor H. and Shah Haneef, Sayed Sikandar (2012) Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia. Review of Development Finance, 2 (3-4). pp. 156-164. ISSN 1879-9337 http://www.sciencedirect.com/science/article/pii/S1879933712000279 http://dx.doi.org/10.1016/j.rdf.2012.09.001
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG Finance
spellingShingle	HG Finance Ibrahim, Mansor H. Shah Haneef, Sayed Sikandar Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia
description	In this paper, we examine the interrelations between bank lending, macroeconomic conditions and financial uncertainty for an emerging economy, Malaysia. Adopting time series techniques of cointegration, causality and vector autoregressions (VARs), we arrive at the following main results. We note long run positive relations between real output and both real bank credits and real stock prices. However, with slow adjustment of real output in responses to credit expansion or stock price increase and weak exogeneity of the latter two variables, both credits and stock prices can be persistently higher than their fundamental values. The phenomenon can be detrimental since it heightens market uncertainty. Our results suggest that heightened market uncertainty is negatively related to output in the long run and, on the basis of dynamics analysis, it is likely to depress real output, real credit and real stock prices. At the same time, we note significant dynamic impacts of interest rate shocks on other variables. Taken together, these results have important implications for macroeconomic performance and stability for the case of Malaysia.
format	Article
author	Ibrahim, Mansor H. Shah Haneef, Sayed Sikandar
author_facet	Ibrahim, Mansor H. Shah Haneef, Sayed Sikandar
author_sort	Ibrahim, Mansor H.
title	Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia
title_short	Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia
title_full	Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia
title_fullStr	Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia
title_full_unstemmed	Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia
title_sort	bank lending, macroeconomic conditions and financial uncertainty: evidence from malaysia
publisher	Elsevier BV
publishDate	2012
url	http://irep.iium.edu.my/28856/ http://irep.iium.edu.my/28856/ http://irep.iium.edu.my/28856/ http://irep.iium.edu.my/28856/1/Bank_lending%2C_macroeconomic_conditions_and_financial_uncertainty.pdf
first_indexed	2023-09-18T20:42:23Z
last_indexed	2023-09-18T20:42:23Z
_version_	1777409451852038144

Bank lending, macroeconomic conditions and financial uncertainty: Evidence from Malaysia

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