Malaysian Financial Stress Index and Assessing its Impacts on the Economy

Volume: 7 Number: 2 June 1, 2017
  • Hussin Abdullah
  • Jauhari Dahalan
  • Khaw Lee Hwei
  • Mohammed Umar
  • Md Mohan Uddin
EN

Malaysian Financial Stress Index and Assessing its Impacts on the Economy

Abstract

The study further investigates the link between the constructed financial stress index (FSI) and overall economic activity. We approximate the co-movement of the identified financial and economic factors into a single index using the principal component analysis. The combine variables explain about 60% of the total variation in the Malaysian FSI and practically captured the known key aspects of financial stress in Malaysia. The study further applies asymmetric causality and structural vector autoregressive to distinguish between causality in good and bad times and examine the structural impulse responses in changes in the economic activity arising from the shocks in financial stress. The study reveals that changes in the Malaysian FSI (MFSI) negatively affects the economic activity of Malaysia whereas, changes in the economic activity is positively related to the MFSI. Furthermore, the asymmetric causality indicates that high financial stress affect the economic activity during economic recession but economic activity irrespective of whether in boom or recession does not influence the MFSI. However, using the growth rate of foreign trade to proxy economic activity indicates that MFSI influences economic activity irrespective of good or bad times. Nevertheless, economic activity measured using GFD also affect MFSI during the period of economic recession. This also shows that the indicators employed in the construction of the index are the near approximation of the FSI for Malaysia due to its ability to reflect the available information included in the index. The study concludes with policy implications based on the behavior of the MFSI.

Keywords

Details

Primary Language

English

Subjects

-

Journal Section

-

Authors

Hussin Abdullah This is me

Jauhari Dahalan This is me

Khaw Lee Hwei This is me

Mohammed Umar This is me

Md Mohan Uddin This is me

Publication Date

June 1, 2017

Submission Date

June 1, 2017

Acceptance Date

-

Published in Issue

Year 2017 Volume: 7 Number: 2

APA
Abdullah, H., Dahalan, J., Hwei, K. L., Umar, M., & Uddin, M. M. (2017). Malaysian Financial Stress Index and Assessing its Impacts on the Economy. International Journal of Economics and Financial Issues, 7(2), 227-235. https://izlik.org/JA47TK74HW
AMA
1.Abdullah H, Dahalan J, Hwei KL, Umar M, Uddin MM. Malaysian Financial Stress Index and Assessing its Impacts on the Economy. IJEFI. 2017;7(2):227-235. https://izlik.org/JA47TK74HW
Chicago
Abdullah, Hussin, Jauhari Dahalan, Khaw Lee Hwei, Mohammed Umar, and Md Mohan Uddin. 2017. “Malaysian Financial Stress Index and Assessing Its Impacts on the Economy”. International Journal of Economics and Financial Issues 7 (2): 227-35. https://izlik.org/JA47TK74HW.
EndNote
Abdullah H, Dahalan J, Hwei KL, Umar M, Uddin MM (June 1, 2017) Malaysian Financial Stress Index and Assessing its Impacts on the Economy. International Journal of Economics and Financial Issues 7 2 227–235.
IEEE
[1]H. Abdullah, J. Dahalan, K. L. Hwei, M. Umar, and M. M. Uddin, “Malaysian Financial Stress Index and Assessing its Impacts on the Economy”, IJEFI, vol. 7, no. 2, pp. 227–235, June 2017, [Online]. Available: https://izlik.org/JA47TK74HW
ISNAD
Abdullah, Hussin - Dahalan, Jauhari - Hwei, Khaw Lee - Umar, Mohammed - Uddin, Md Mohan. “Malaysian Financial Stress Index and Assessing Its Impacts on the Economy”. International Journal of Economics and Financial Issues 7/2 (June 1, 2017): 227-235. https://izlik.org/JA47TK74HW.
JAMA
1.Abdullah H, Dahalan J, Hwei KL, Umar M, Uddin MM. Malaysian Financial Stress Index and Assessing its Impacts on the Economy. IJEFI. 2017;7:227–235.
MLA
Abdullah, Hussin, et al. “Malaysian Financial Stress Index and Assessing Its Impacts on the Economy”. International Journal of Economics and Financial Issues, vol. 7, no. 2, June 2017, pp. 227-35, https://izlik.org/JA47TK74HW.
Vancouver
1.Hussin Abdullah, Jauhari Dahalan, Khaw Lee Hwei, Mohammed Umar, Md Mohan Uddin. Malaysian Financial Stress Index and Assessing its Impacts on the Economy. IJEFI [Internet]. 2017 Jun. 1;7(2):227-35. Available from: https://izlik.org/JA47TK74HW