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Despite numerous attempts to remove tariff and non-tariff barriers, the average number of barriers in the agricultural sector, particularly in the palm oil sector, is rising. Non-tariff effects are subjective, which makes them challenging to quantify. A new palm oil trade restrictiveness index that considers each trade barrier imposed on palm oil exports, such as tariff and non-tariff measures, is necessary to facilitate the sector's exports. Hence, this study aims to calculate the trade restrictiveness index (TRI) of palm oil and analyse its impact on Malaysia's and Indonesia's palm oil exports. This study uses a gravity model with Poisson pseudo-maximum likelihood (PPML) estimation to analyse the impact of trade barriers on world palm oil export for a sample of 59 major palm oil importing countries from 2009 to 2019. The study revealed that each importing country imposes different restrictions on Malaysia and Indonesia. The TRI showed a negative and significant relationship influencing palm oil exports in the case of Malaysia, while a positive and significant relationship for Indonesia. The policy implications of this study suggest that policymakers in both Malaysia and Indonesia should take proactive steps to comply with every criterion demanded by the importing country.

Purpose ― This study aims to examine the impact of population aging and fertility rates on economic growth in Malaysia for the sample spanning from 1961 to 2020. Method ― The study uses an Autoregressive Distributed Lagged (ARDL) model to examine the relationship between economic growth, the aging population, fertility rate, capital stock, and employment rate. Findings ― The main results provide evidence of a long-run relationship between aging, fertility rate, employment, and capital stock on Malaysian economic growth. The results also show that the aging population harms economic growth in the long run, but a decline in the fertility rate has been favorable to long-term economic growth. Implication ― These findings have significant implications for the execution and formulation of national aging and demographic policies and government efforts to achieve long-term fiscal sustainability. Originality ― This study empirically investigated the link between population aging and economic development, reflecting recent demographic trends in Malaysia. This study uses current data and an Autoregressive Distributed Lagged (ARDL) technique to analyze long-term economic growth and its association with supply-side determinants

Most countries have suffered from prolonged budget deficits over the past two decades. This situation has made researchers and policymakers aware of the challenges to debt sustainability. This study investigates the threshold effect of institutional quality on debt sustainability in a panel of 82 countries, focussing on various threshold effects at different income levels. All the countries selected for this study fell under the categories of high income (HI), upper middle income (UMI), and lower-middle and low income (LMLI) based on the World Bank classifications. The dynamic threshold panel regression results indicate the presence of a threshold effect of institutional quality on the fiscal reaction function (including debt sustainability and cyclical fiscal policy) in all the countries with different income levels. In HI countries, fiscal adjustment weakens if institutional quality surpasses the threshold value of institutional quality. The fiscal adjustment in UMI countries is similar to that in HI countries but statistically insignificant. By contrast, governments in LMLI countries can promote sustainable debt if their institutional quality exceeds the threshold value. Thus, policymakers in LMLI countries need to prioritise their efforts to raise the level of institutional quality to promote debt sustainability.

A particular country’s productive knowledge and sophistication become a crucial determinant for the exported products in the increasingly integrated global trade. However, studies that emphasize the connection between economic complexity and trade flows are still sparse. This research aims to examine the role of economic complexity on bilateral trade flows of 27 countries in COMESA and East Asia using the gravity model from 1995 till 2019. Based on countries’ geographical regions and income levels, the empirical estimation of the study applied the Poisson pseudo maximum likelihood (PPML) estimator. The main results are robust to various model specifications and consistent with the expectations of the gravity model indicators. The study found strong empirical evidence that the expansion of economic sophistication and diversification enlarges trade flows of different exported goods. Explicitly, economic complexity increases the exports of machinery and transport equipment alongside manufactured products, while its effects on agricultural exports are negligible. Thus, this study proposes that the countries should engage in more sophisticated Research and Development (R&D), attract multinational companies, establish industrial policies, and improve their productivity by utilizing the existing production network. They should move to a more diversified production and trade structure to enhance their bilateral trade flows.

Abstract Background Out-of-pocket (OOP) payments for healthcare services potentially have severe consequences on households, especially among the poor. Under certain circumstances, healthcare payments are financed through selling household assets, or borrowings. This certainly could influence households’ decision, which likely resorts to forgoing healthcare services. Thus, the focal point of this study is aimed to identify the inequalities and determinants of distress financing among households in Malaysia. Methods This study used secondary data from the National Health and Morbidity Survey (NHMS) 2019, a national cross-sectional household survey that used a two-stage stratified random sampling design involving 5,146 households. The concentration curve and concentration index were used to determine the economic inequalities in distress financing. Whereas, the determinants of distress financing were identified using the modified Poisson regression model. Results The prevalence of borrowing without interest was the highest (13.86%), followed by borrowing with interest (1.03%) while selling off assets was the lowest (0.87%). Borrowing without interest was highest among rural (16.21%) and poor economic status (23.34%). The distribution of distress financing was higher among the poor, with a concentration index of -0.245. The modified Poisson regression analysis revealed that the poor, middle, rich, and richest had 0.57, 0.58, 0.40 and 0.36 times the risk to develop distress financing than the poorest socio-economic group. Whereas, the presence of one and two or more elderly were associated with a 1.94 and 1.59 times risk of experiencing distress financing than households with no elderly members. The risk of developing distress financing was also 1.28 and 1.58 times higher among households with one and two members receiving inpatient care in the past 12 months compared to none. Conclusions The findings implied that the improvement of health coverage should be emphasized to curtail the prevalence of distress financing, especially among those caring for the elderly, requiring admission to hospitals, and poor socio-economic groups. This study could be of interest to policymakers to help achieve and sustain health coverage for all.

This study investigates the relationship between household credit and banking stability in Malaysia using a sample of 37 commercial banks spanning the period from 2008 to 2015. In analyzing household credit’s influence on the Malaysian banking sector’s stability, household credit was categorized into two components, namely mortgage and consumer credit. The Banking Stability Index (BSI) for each bank is constructed using 15 bank-specific variables and some macro-economic variables. The determinants of the BSI are estimated using a static panel data technique. The fixed-effects regression results showed a statistically significant negative relationship between both forms of household credit (mortgage credit and consumer credit) upon the banking sector’s stability. The finding signals that understanding the link between household credit and the Bank Stability Index is crucial to the policymakers and the banks’ management in closely monitoring household credit, particularly mortgage and consumer credit.

The purpose of this study is to examine the role of push and pull factors that have influenced China’s outward foreign direct investment (COFDI) in the Belt and Road Initiative (BRI) countries. The sample of BRI countries is divided according to three geographical regions representing Europe, MENA, and Asia for better understanding of the main factors that influence the COFDI across the respective regions. This study supports Dunning’s FDI theory in modeling the determinants of COFDI in BRI economies by focusing on the role of push and pull factors. This present study also extends and improves the existing research by considering the new factors, new methodology, and splitting the sample BRI economies. Thus, a static, dynamic panel and quantile regression technique was employed to model COFDI determinants for 50 BRI countries from 2005 to 2016. The main findings revealed that China’s minimum wage policy, including the host countries’ natural resources, labor cost, and institutional factors were the key determinants influencing COFDI. However, some determinants such as the host countries’ gross domestic product, total patents, trade openness, and inflation rate did not significantly influence COFDI. By splitting the sample according to the respective regions, the results revealed that only the minimum wage policy significantly influenced COFDI in the European region. In comparison, natural resources, gross domestic product, and minimum wage policy were statistically significant for the MENA region. In the Asian region, minimum wage policy, government index, and trade openness were proven essential for COFDI. The policy implications from this study suggest that MNCs from China need to strategize their location for investment in BRI economies. In complement, the BRI recipient countries need to show their advantage and strength in attracting more FDI from China. BRI economies and China MNCs can also be leveraged through understanding how strong the push and pull factors are exerting on outward investment from China. First published online 30 March 2022

While many recent studies have used the ecological footprint as a comprehensive indicator of environmental degradation instead of CO2 emission, these were mainly focused on consumer responsibility. This study, however, aims to cover both aspects of consumption and production to elicit a more comprehensive understanding. Furthermore, this study addresses another information gap by analyzing the effect of aggregated and disaggregated economic activities on the environment. Panel data were used and sourced from 92 countries classified by income group spanning 1992 to 2015. Comprehensive financial development indicators, energy structure, energy intensity, trade openness, and urbanization were considered in examining their impacts on environmental degradation. The pooled mean group estimation was adopted in examining the long-run and short-run relationship between variables. The main findings suggest that financial development promotes green investment in high-income and upper-middle-income countries but increases degradation in lower-middle and lower-income countries. Renewable energy improves the environment in general, and energy intensity is a crucial factor in environmental modeling across all groups. Most importantly, a U-shape relationship is found on both the consumption and the production side for all income groups except for lower-income countries (inverse U-shape) on the production side. Interestingly, a U-shape relationship was found in high-income and upper-middle-income countries in the industrial sector, but a monotonic relationship in the service sector. A U-shape relationship was found for the industrial and service sectors in lower-middle-income and lower-income countries, but an inverse U-shape for agriculture outputs in lower-middle-income countries. This finding suggests the need to shift from fast-growth strategies to strategic growth planning that considers the nature of the relationship between economic sectors and the environment while diversifying the economic structure to allow for the recovery of natural capital.

Palm oils have been proven to have the highest yield among vegetable oils, which is one of the critical factors in ensuring global food security. However, the world palm oil market has not been entirely utilised due to intervention policies that disrupt the global trade flow. Hence, this study aims to identify the technical efficiency of palm oil exports and then analyse the export potential of two leading producers and exporters of palm oil, Malaysia and Indonesia. A stochastic frontier model (SFM) has been used to estimate the level of technical efficiency across two countries for a sample of 59 major palm oil importing countries during 2009–2019. Palm oil export potential is then calculated using the value of technical export efficiency obtained from the SFM. The main findings revealed the technical inefficiency of world palm oil exports. Comparing the two countries, the Indonesian average technical efficiency value is higher than Malaysian throughout the year. Moreover, the technical efficiency estimates reveal that Malaysia and Indonesia dominate different markets, except in the Netherlands. In terms of export potential, the study found that both major exporting countries of palm oil have great potential to tap more into the same countries, namely China, India, Thailand and the United States. The policy implications of this study suggest that policymakers from both countries should set up a new combined strategy to maximise the palm oil export to their trading partners. Low technical efficiency values in several importing countries show great potential to explore further. Hence, there is a vast potential market for palm oil export to be tapped in those countries.

When the government creates state-owned enterprises (SOEs), one of the primary purposes is to reduce its financial burden in the long run, also called financial sustainability. Nonetheless, previous research has pointed out that SOEs struggle to achieve financial sustainability due to government intervention. In this study, we examine the relationship between the financial sustainability of SOEs and government intervention in Malaysia. We take a novel approach, using share ownership to measure government intervention. Our results show that the threshold effect of government ownership on financial sustainability in Malaysia is around 27%. The findings prove that the SOEs of an emerging country could reach financial sustainability only if the government ownership is below the threshold. Finally, this study discusses the policy implications of our findings for SOEs. The government of Malaysia should propose a road map to gradually reduce its ownership of SOEs below the threshold.

This paper investigates the spillover effects of Chinese real and monetary sector shocks on the Belt Road Initiative (BRI) economies. The study adopted a panel vector autoregression (PVAR) estimation technique to analyse the dynamic propagation of Chinese shocks in the real sector (gross domestic product (GDP) and trade openness (OPEN)) and monetary sector (nominal interest rate (NIR)) for a sample of 50 BRI countries from 2000 to 2017. The main results revealed that Chinese income shocks positively spill over to all macroeconomic variables except BRI countries’ consumer price index (CPI). However, the Chinese trade openness shock only has a temporary positive spillover to BRI international trade and a temporary negative spillover on its monetary policy. In addition, the Chinese monetary policy shock has a negative spillover on GDP and a positive spillover on CPI in BRI economies. Chinese shocks, however, do not constitute a significant source of variation in any interest variable. As explained by the Chinese income shock, the BRI interest rate is the highest percentage of variable variation accumulated over time. Further, the highest variation of Chinese trade shock is BRI trade openness, and lastly, the highest variation of Chinese interest rate shock is CPI in BRI economies. The beggar-thy-neighbour effect may dominate the positive trade effect and is a negative impact of the Chinese shocks. Hence, BRI economies should alleviate the adverse shocks since the upcoming rapid growth from the Chinese has disturbed the BRI economies. Our results reveal the importance of Chinese development on BRI partners’ economies and the significance of Chinese shocks in real and monetary sectors in assisting policymakers in designing international and monetary policy for BRI economies.

This paper estimates the comovement between two leading cryptocurrencies and the G7 stock markets. It then attempts to explain the comovement with the rational investment theory by examining whether it is driven by market uncertainty measures, public attention to COVID-19, and the government’s containment and health responses to COVID-19. Wavelet Coherence heatmaps show that the stock-cryptocurrency comovements increase significantly and positively during the pandemic, indicating that cryptocurrencies lose their safe haven properties against stocks during the heightened market uncertainties. Over the longer investment horizons, Bitcoin reemerges as a safe haven or strong hedger while Ethereum’s properties weaken. Seemingly Unrelated Regression results reveal that the stock-cryptocurrency comovements are rationally explained by market uncertainties, government responses to COVID-19, and market fundamentals. However, the comovements are also driven by the fear of COVID-19 to a certain extent. Our findings offer valuable insights for investors considering cryptocurrencies to rebalance their equity portfolios during market distress. For policymakers, the Economic Policy Uncertainty (EPU) results suggest that government policies and regulatory frameworks can be used to regulate speculation and investment activities in the cryptocurrency market.

Kertas ini bertujuan untuk mengkaji kesan keterangkuman kewangan terhadap pertumbuhan firma dalam kalangan firma kecil, sederhana dan besar (275 buah firma) di negara Malaysia dan Indonesia dengan menggunakan teknik penganggaran regresi ambang keratan rentas. Tahap keterangkuman kewangan diukur berdasarkan agihan perkhidmatan kewangan merentasi firma iaitu akses kepada kredit. Keputusan kajian mendapati wujud kesan tidak monotonik dalam hubungan antara keterangkuman kewangan dan pertumbuhan firma, yang mana kesan keterangkuman kewangan terhadap pertumbuhan firma hanya signifikan dan positif di bawah tahap ambang. Implikasi dasar daripada kajian ini mencadangkan pemilik firma dan institusi kewangan perlu mengekang pengagihan akses kepada kredit supaya berada dalam lingkungan nilai optimum atau tahap ambang untuk menjamin pertumbuhan firma. Abstract This paper aims to investigate the effects of financial inclusion on the firms’ growth from selected small, medium and large firms (275 firms) in Malaysia and Indonesia countries using a cross section threshold estimation technique. The levels of financial inclusion across firms were measured based on the distribution of financial services across the selected firms (access to credit). This paper reveals that there is a non-monotonic effect in the financial inclusion-firm’s growth nexus in which the impact of financial inclusion on firm growth is significantly positive below a certain threshold point. The main finding suggest that the firms’ owners and banking institutions should restrict the distribution of credit access within the optimum value or threshold level in promoting the growth of the firms. Keywords: Financial inclusion; firm growth; threshold estimation.

This paper aims to examine the effect of macroeconomic condition on microcredit coverage in Malaysia. The Microcredit Organizations (MO) was established to complement the mainstream financial institutions but challenges remain with microcredit performances associated with microcredit coverage. The paper accordingly investigates the effects of macroeconomic condition on microcredit coverage in the Malaysian context. To achieve the objective, the static panel data technique is adopted, which comprises 13 states and three Federal Territories in the country, spanning 2011 to 2015. The findings reveal the resiliency of MO towards macroeconomic conditions in Malaysia. The increase in the inflation rate and agriculture GDP (LNAGDP) share shows significant negative and positive effects (non-resilient) on microcredit coverage. The main findings will assist in addressing the newly identified macroeconomic condition to improve on micro credit performance. Policy implications emanating from the study are expected to be relevant to the government, MOs and borrowers. The government accordingly can make important contributions to borrowers by maintaining macroeconomic stability (inflation and LNAGDP share) through appropriate policies in order to achieve good microcredit coverage. MOs may revisit the existing quality regulation (MOs risk weighing loan disbursement) based on the macroeconomic condition which, in turn, can be used in outreaching more microcredit borrowers. Finally, this study may also help to elucidate specific understanding of the government and MO objectives in outreaching microcredit borrowers. Keywords: microcredit coverage, macroeconomic condition, microcredit organisation, Malaysia

This paper examines the long- and short-run dynamic causality between the futures price and trading volume in the Malaysian equity market. The data of futures price, trading volume and spot price are in daily frequency, spanning from 2006 to 2009. By using ARDL cointegration and VECM causality tests, the findings revealed the existence of long-run relationship between futures price, volume and spot prices. In addition, there exists a short-run bidirectional causality relationship running between futures return-trading volume and futures return-spot return. Thus, the stock index futures market in Malaysia is not informational efficient.

Movements in palm oil price give important signals to various stakeholders of the palm oil industry in Malaysia. Thus, understanding external and internal factors that may affect the palm oil price is vital to the industry players for sustainability of their activities. This study investigates relative importance of external and internal shocks on the movement of palm oil price in Malaysia. Employing a structural vector autoregressive (SVAR) model on quarterly data from 1990 to 2019, the findings reveal that external shocks are more dominant in affecting the palm oil price. Shocks to the crude oil price, the prices of substitution goods (soybeans oil, rapeseed oil, and sunflower oil), the world palm oil price, and foreign income significantly affect the palm oil price in the short and medium run. The results also indicate that a shock to soybean oil price has a more profound effect on the palm oil price than a shock to rapeseed oil or sunflower oil prices, respectively. Likewise, shocks to incomes from India as well as from Netherlands create greater impacts on the palm oil price than a shock to income from the other trading partners, respectively. The study has shown the importance of external factors in affecting the palm oil industry.

This study aims to investigate the determinants of capital expenditure (capex) for Malaysian palm oil companies listed at Bursa Malaysia. The study uses the dynamic panel data analysis (generalized method of moment) estimation for the sample of 40 palm oil-oriented firms that spanning from year 2000 until 2016. Findings/Originality: The empirical findings revealed that, in the short run and the long run, the capex spending is significantly affected by the cash flow, sale growth, and world crude palm oil price. However, Average Q significantly influences the capex decision in the long run only. Thus, the policy implication from this study suggests that palm oil-oriented firms should take into account the movement of world crude palm oil (CPO) price in designing their capital expenditure strategy. In addition, proper planning for managing firms’ cash flow and sale growth are also important for expanding their capex in future.

This study examines whether a debt-to-GDP threshold exists in the public debt and economic growth relationship for 20 Middle East and North Africa (MENA) countries from 1990 to 2016 using the threshold estimation technique. The empirical results reveal that there is a threshold effect in the public debt and economic growth relationship. The MENA region’s debt-to-GDP threshold value as a developing region is lower than the debt threshold computed by earlier studies for developing countries. We found that the effect of public debt on economic growth is significant and positive only below the threshold value of debt-to-GDP. More precisely, debt has a promoting influence on economic growth when the debt is less than 58% of the GDP. This finding indicates that the relationship between public debt and economic growth is contingent on the debt-to-GDP ratio. Importantly, policymakers need to be more prudent when establishing a policy regarding debt issues.

This paper examines the effect of financial inclusion on the firm growth of the manufacturing sector (513 firms) in selected ASEAN countries (Malaysia, Philippines, and Vietnam) using a cross-section threshold estimation technique. The levels of financial inclusion across firms were measured based on the distribution of financial services (access to credit). The main findings revealed that there is a non-monotonic effect of financial inclusion on the firm’s growth. These findings show that the impact of financial inclusion on firm growth in the manufacturing sector is significantly positive below a threshold point, and turns to significantly negative after a certain threshold point has been reached. These new findings suggest that manufacturing firm owners and banking institutions should deepen their financial inclusion efforts, and limit the distribution of credit access within the optimum value or threshold level in promoting the growth of the firm.

This paper examines the relevance of the bank lending channel of monetary policy in Egypt using bank-level data. Previous empirical studies in Egypt that used macro-level data have not supported the relevance of the bank lending channel. However, using a sample of 32 commercial banks for the period from 1998 until 2011 and a dynamic panel GMM technique, the empirical findings revealed the relevance of the bank lending channel of monetary policy in Egypt. Moreover, there is a heterogeneity effect of monetary policy on bank loans according to bank size, in which the small banks are more affected during a monetary contraction than larger banks. This finding signals that the monetary authorities in Egypt should take cognizance of the stability of interest rates in order to stabilize the bank loan supply.

This paper examines the implementation of monetary policy during the interest rates targeting in a small-open economy (i.e. Malaysia) by using an open-economy structural VAR (SVAR) study. It tests the effect of foreign shocks upon domestic macroeconomic fluctuations and monetary policy, and examines how effective monetary policy is in influencing macroeconomic variables. The results show that during interest rates targeting, monetary policy plays a significant role in affecting macroeconomics variables. This finding suggests that monetary policy has an important role as a stabilization policy in a small-open economy.

The objective of this study is to examine the relationship between overnight money of Islamic bank and conventional bank based on daily data begins from 12th October 1998 until 10th June 2005. This study is important to determine whether overnight money of conventional bank or overnight money of Islamic bank, become the leader or follower in the interbank money market. The econometrics tests such as unit root test, VAR model and Granger causality test have been applied. Result shows that both variables are stationary at level form or I(0). This implies that we don’t need to further analysis with cointegration test. In this case, we appllied the traditional model of VAR and Granger causality test. Empirical findings indicates that the existence of bi-directional causality between overnight money of Islamic bank and conventional bank.

Artikel ini mengkaji secara empirik pengaruh kewangan (kewangan dalaman dan luaran) dan kebebasan ekonomi terhadap pertumbuhan firma patuh syariah yang tersenarai di Bursa Malaysia dari tahun 2000-2010. Kaedah regresi data panel statik, iaitu model kesan tetap (fixed effect) dan kesan rawak (random effect) telah digunakan untuk menganggar penentu pertumbuhan firma tersebut. Sampel firma patuh syariah telah dipecahkan kepada enam sub sektor ekonomi, iaitu barang pengguna, barang industri, perkhidmatan, sektor pembinaan, hartanah dan teknologi. Hasil kajian mendapati pertumbuhan firma patuh syariah mengikut subsektor ekonomi sangat sensitif dipengaruhi sumber kewangan dalaman berbanding dengan kewangan luaran. Kebebasan ekonomi pula mempunyai pengaruh yang negatif terhadap pertumbuhan firma. Hasil kajian ini menunjukkan firma patuh syariah perlu mengambil kira aspek sumber kewangan dan kebebasan ekonomi untuk menjana pertumbuhan. Kata kunci: pengaruh kewangan; kebebasan ekonomi; pertumbuhan firma; data panel statik; subsektor; firma patuh syariah.

Kertas ini bertujuan mengkaji hubungan antara perbelanjaan awam dengan pertumbuhan ekonomi di peringkat kerajaan negeri di Semenanjung Malaysia. Beberapa pemboleh ubah yang lain seperti hasil cukai, imbangan fiskal, dan jumlah populasi penduduk juga diambil kira dalam menganggar model persamaan. Kajian ini mengaplikasi ujian kointegrasi Johansen untuk menganalisis hubungan jangka panjang (kointegrasi) dan model vektor pembetulan ralat (VECM) untuk menentukan arah sebab-menyebab dalam jangka pendek dan jangka panjang dalam kalangan pemboleh ubah kajian. Keputusan kajian menunjukkan; pertama, tidak wujud hubungan jangka panjang antara output negeri dengan belanja awam di negeri Selangor. Kedua, di negeri Pahang dan Melaka wujud hubungan sebab-menyebab dua hala dalam jangka panjang antara output negeri dengan belanja awam. Ketiga, dalam jangka pendek, perubahan output signifikan menjadi penyebab Granger kepada perubahan perbelanjaan awam di Negeri Sembilan, Kedah, Melaka dan Pulau Pinang, yang menyokong hipotesis Wagner. Sebaliknya, di negeri Pahang dan Perak, perubahan perbelanjaan awam signifikan menjadi penyebab Granger kepada perubahan output dalam jangka pendek, yang mengesahkan hipotesis Keynes di negeri tersebut. Kata kunci: Perbelanjaan awam, pertumbuhan ekonomi, ujian kointegrasi Johansen, VECM, VAR.

This paper examines the long- and short-run dynamic causality between the futures price and trading volume in the Malaysian equity market. The data of futures price, trading volume and spot price are in daily frequency, spanning from 2006 to 2009. By using ARDL cointegration and VECM causality tests, the findings revealed the existence of long-run relationship between futures price, volume and spot prices. In addition, there exists a short-run bidirectional causality relationship running between futures return-trading volume and futures return-spot return. Thus, the stock index futures market in Malaysia is not informational efficient.

Since the establishment of Grameen Bank in 1976 by Professor MuhammadYunus1, many economists have studied extensively, either theoretically or empirically, the success of the Grameen Bank in eradicating the poverty problem in Bangladesh. Therefore, this paper aims to apply the mechanism design theory in microfinance by examining the role of joint liability and cross reporting mechanism in the loan contract which is designed by microfinance lender. In doing so, this study simplified the joint liability mechanism proposed by Ghatak (1999, 2000) and cross-reporting mechanism by Rai and Sjostrom (2004). Based on the joint-liability mechanism, it is clearly stated that the microfinance lender can minimise or avoid the adverse selection problem in the credit market through peer selection and peer screening. In the meantime, the joint liability mechanism is better than individual lending in terms of increasing the social welfare among the poor borrower, charging lower interest rates, and generating high repayment rates. In contrast, Rai and Sjostrom (2004) argued that joint liability alone is not enough to efficiently induce borrowers to help each other. Indeed, the cross-reporting mechanism is also important for lenders in order to minimise the problem of asymmetric information in the credit market. The cross-reporting mechanism is also efficient because it can influence the borrower to be truthful-telling about the state of the project and subsequently can minimise the deadweight loss (punishment) among the borrowers. In comparison, without cross reporting, the lending mechanism is inefficient because the borrower will be imposed harsh punishment from the bank and the bank can undertake auditing or verify the state of the project and punish accordingly. Keywords: Microfinance; mechanism design; joint liability; cross-reporting.

Kajian ini bertujuan untuk menguji kemeruapan (volatility) halaju wang disamping menganggar fungsi halaju wang di Malaysia dengan menggunakan kaedah ekonometrik siri masa iaitu model ARCH dan GARCH, ujian kointegrasi Johansen dan ujian model vektor pembetulan ralat (VECM). Dapatan kajian menunjukkan bahawa halaju wang M1 (V1) dan halaju wang M2 (V2) mempunyai kemeruapan yang berkelangsungan (persistence) berbanding dengan kemeruapan halaju wang M3 (V3). Keputusan ujian kointegrasi Johansen pula menunjukkan kewujudan hubungan jangka panjang antara halaju wang V1, V2 dan V3 dengan pemboleh ubah bebas yang terdiri daripada kadar bunga bon, kadar bunga deposit dan pendapatan negara. Selain itu, ujian VECM menunjukkan bahawa perubahan pemboleh ubah bebas iaitu kadar bunga bon, kadar bunga deposit dan pendapatan negara signifi kan menjadi penyebab kepada perubahan halaju wang V2 dan V3 dalam jangka panjang. Sebaliknya, dalam jangka pendek didapati perubahan pendapatan negara hanya signifi kan menjadi penyebab kepada perubahan halaju wang V2 dan V3 sahaja. Pengaruh kadar bunga hanya signifi kan menjadi penyebab jangka pendek kepada halaju wang V3 sahaja. Kajian ini memberikan beberapa implikasi penting kepada dasar kewangan negara.

The main objective of this paper is to evaluate the relative impact of financial sector development, government size and trade openness of a country on its economic growth. This is done to investigate which factors play more prominent role in leading the growth of the economy. Four ASEAN countries known for their similar economic orientation, namely Ma-laysia, Thailand, Indonesia and Singapore have been selected for this purpose. To achieve the objective, a series of econometric tests is applied. These include unit root test and cointe-gration test. A vector error correction model (VECM) is then applied to capture both the short-run dynamic and the long-run equilibrium relationship between variables. Impulse response function is utilized to look at the impact of each variable on economic growth while variance decomposition is used to measure the magnitude of the impact. The results show that trade openness plays the leading role in promoting economic growth in Malaysia, Sin-gapore and Indonesia. For Malaysia financial sector development follows second and the government size comes third while for Singapore the order is reverse. For Indonesia, the government size overtakes the leading role at the later stage while the financial sector devel-opment is immaterial. For Thailand, no firm conclusion can be made, as the results are not promising. The results signify that the right policies have been taken by the selected coun-tries to promote higher economic growth. Keywords: Economic growth, financial sector development, government size, trade openness.

The main objectives of this paper is to examine the long run relationship between total expenditure, revenue (tax and nontax) and economic growth in ASEAN-5 countries namely by Malaysia, Indonesia, Thailand, Singapore and Philippines. According to the prior studies, there are several hypotheses to explain the relationship between revenue and spend-ing such as (1) spend-revenue hypotheses, (2) revenue-spend hypotheses and (3)bi-directional causality hypotheses. To test the validity of these hypotheses, this study will util-ize a cointegration and variance decomposition analysis. Based on empirical evidence, we can concluded that the existence of long run relationship between government spending, revenue (tax and non tax) and economic growth for all ASEAN-5 countries. The result of variance decomposition also shows that the strong influence on expenditure to revenue in countries namely Malaysia, Indonesia and Philippines, which support the ‘spend-revenue hypotheses. Meanwhile, for Thailand and Singapore the budget decision driven by revenue side which support the ‘revenue-spend hypotheses’. In addition, public expenditure plays no role to stimulate economic growth in Malaysia, Thailand, Singapore and Philippines, except for Indonesia. Key words: Fiscal economics; Wagner law; cointegration test; variance decomposition

The determination of the term structure of interest rate is of great interest to both policy makers and researchers in finance and economics. Not surprisingly, a large body of literature (among others, Fisher (1907), Cox, Ingersoll and Ross (1985), and Longstaff (2000). The uncertainty of interest rates is another variable that has been widely investi-gated, since it measures uncertainty of a macroeconomic nature. It is important both for its effect on the macroeconomic variables (interest rates, investments, etc.) and its effect on in-dividual or firm investment decisions (see, for example, Siegfred (2000)). Therefore, this study will focus on the interest rate spread resulting from default risk and attempts to explain how and why the risk spread leads business cycles. This study also contribute to the existing literature by looking at the interest rate uncertainty that plays a critical role in explaining the interest rate spread and economic activity. Furthermore, the finding shows that interest rate uncertainty embodies useful information in term of predicting the growth rate of indus-trial production. Key words: interest rate uncertainly, interest rate spread, economic activity

Kajian ini bertujuan untuk mengkaji hubungan antara variabiliti harga relative (VHR) dengan inflasi di tiga buah wilayah Malaysia iaitu Semenanjung Malaysia, Sabah dan Sarawak dengan menggunakan data siri masa bulanan iaitu dari Januari 1970 hingga Mac 2005. Kajian ini menggunakan kaedah siri masa tidak linear iaitu model STAR dan LSTAR. Dapatan kajian menunjukkan variabiliti harga relatif mempunyai ciri tidak linear LSTAR bagi ketiga-tiga kes wilayah Malaysia. Selain itu, didapati pengaruh inflasi adalah signifikan dan berhubungan positif dengan variabiliti harga relative di Semenanjung Malaysia, Sabah dan Sarawak. Hasil kajian juga mendapati hubungan antara pemboleh ubah variabiliti harga relatif dengain inflasi adalah dalam bentuk tidak linear. Kcputusan kajian ini menyokong teori kos menu yang menyatakan bahawa variabiliti harga akan meningkat apabila berlakunya kenaikan dalam harga umum. Selain itu juga, didapati komponen stokastik bagi variabiliti harga relatifi mempunyai kelangsungan (persistence) dalam ketiga-tiga wilayah dalam tempoh kajian. Penemuan kajian ini memberikan implikasi bahawa dasar kawalan harga dan perlaksanaan dasar kewangan perlulah memfokuskan usaha mengawal kestabilan harga relatif dalam kalangan kumpulan barang.

Objektif utama kajian adalah untuk mengkaji hubungan sebab-menyebab antara pemboleh ubah fiskal iaitu perbelanjaan kerajaan dengan kutipan hasil cukai. Berdasarkan kajian lepas, terdapat tiga hipotesis yang menerangkan hubungan antara perbelanjaan dengan hasil iaitu (1) hipotesis belanja-hasil (spend-revenue hypothesis), (2) hipotesis hasil-belanja (revenue-spend hypothesis) dan (3) hipotesis arah sebab menyebab dua hala (bi-directional causality hypothesis) antara hasil dengan perbelanjaan yang menyokong ‘the fiscal synchronization hypothesis’. Justeru, bagi menguji hipotesis-hipotesis tersebut, kaedah ekonometrik siri masa seperti ujian kointegrasi, ujian sebab menyebab Granger, kaedah penguraian varians dan fungsi tindak balas diaplikasikan dalam kajian ini. Dapatan kajian menunjukkan bahawa hipotesis belanja-hasil (spend-revenue hypothesis) wujud bagi kerajaan persekutuan. Ini bererti, pertumbuhan perbelanjaan kerajaan persekutuan mempengaruhi pertumbuhan jumlah hasil. Bagi kerajaan negeri, keputusan empirikal menunjukkan arah sebab menyebab dua hala (bi-directional causality hypothesis) antara hasil dengan perbelanjaan yang menyokong ‘the fiscal synchronization hypothesis’. Di samping itu, pertumbuhan GDP juga mempengaruhi pertumbuhan perbelanjaan kerajaan persekutuan dan kerajaan negeri iaitu menyokong teorem Wagner.