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Asian Finance & Banking Review; Vol. 4, No. 1; 2020 
ISSN 2576-1161    E-ISSN 2576-1188 

Published by Centre for Research on Islamic Banking & Finance and Business, USA 

 

     42 
 

 

Stock Market Development on Economic Growth of South Asian and 
Malaysian Economies: A Comparative Analysis 

 
 

Muhammad Gias Uddin 
PhD Student 

Department of Accounting & Management 
Universiti Tunku Abdul Rahman (UTAR), Malaysia 

E-mail: mdgias89@gmail.com 
 

Mohin Uddin 
PhD Student 

Department of Accounting & Management 
Universiti Tunku Abdul Rahman (UTAR), Malaysia  

E-mail: mohin1uddin2@yahoo.com 
 

Sanjida Sultana Emu 
BBA (Finance & Banking) 

International Islamic University Chittagong, Bangladesh  
E-mail: sanjidasultana587@gmail.com 

 
 
Abstract 
This analyzes concerning empirically appraise the effects and effect of stock market growth on the economic increase in two areas, 
in particular, South Asia and Malaysia. The researcher used market capitalization, total fee traded ratio, and turnover ratio as signs 
on inventory market improvement whilst GDP through a capital increase worth is back because of standardized monetary 
improvement. The linear dashboard facts methodology is utilized over the yearly facts about 1996-2018 according to locate out 
concerning the phenomenon. The effect is then compared at some stage in the countries concerning both regions. The experimental 
findings point out that inventory need enhancement contributes after half extent between the financial expand on the South Asian 
region but its impact concerning Malaysian neighborhood discovered in imitation which is very much significant.  
 
Keywords: Stock Index, Economic Development, South Asian Market, Malaysia.  
 
1. Introduction  
1.1 Introduce the Problem 
The notion concerning economic development to flourish monetary development was as soon as delivered by access. A raised yet 
nicely developed monetary regulation may make a contribution in imitation of the economic increase concerning a country, and 
well- functioning economic rule may keep obtained by the capability of practical innovation yet environment pleasant provision 
regarding resource allocation. Schumpeter attracts interest after the administration of matter the place monetary establishments are 
obligatory because of pecuniary growth due to the fact appropriate in imitation of these organizations worthwhile investment 
could be easier and more possible. He emphasized the banking procedure to be honored into increase then improvement on us 
regarding a. There are deep other researchers anybody difficult among the region concerning monetary development after 
expanding association, which includes. 

Discus According to an imitation of Adjasi & Yartey (2007). the boom about an economic system enhances the 
economic location development. When a financial system develops, that promotes monetary improvement with the aid of course 
of responding to the greater claim concerning functions provided utilizing monetary institutions. With the growth of monetary 
activities, financial features require additional increases or among discipline following join the growing claim more economic 
institutions built, which consequences into standard monetary development. The well- developed monetary markets, through 
bettering headquarters accumulation, accomplish contributions in imitation of financial development. This reason has been 
supported by way of researchers together. The monetary firms execute grant a vast extent concerning applications into a system 
under enhancing growth. There are special methods as may keep aged in imitation of absorbing a seem to be at so much how 
financial enhancement enhances growth. These consist of sources allocation, hazard diversification, advertising, and marketing 

mailto:E-mail:%20mdgias89@gmail.com
https://www.iiuc.ac.bd/


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about savings, yet specialization within industrial (Adjasi & Yartey, 2007).  
                  It is not frequent affairs so much monetary increase execute be rendered through monetary improvement only. The 
market of inventory allows the community after deflecting their monetary savings beyond tiny following increased dependable 
projects. Capital property is being produced over these kinds of variations. Because of the increase of demand, the lengthy conduct 
initiatives may keep commenced that shifts the industrialization and strikes closer according to development (Barnor & Wiafe, 
2015). Funding possibilities need to lie introduced through done nicely managed or equipped inventory market. This does stand 
complete when fairness markets take on responsibilities certain tasks so grant most profits and ultimately consequences into 
monetary growth. Stock markets hold a massive function of the increase or improvement of economies into both promoted and 
creating countries. Stock markets function greater than not many services as honor industrial foot then fit after this purpose are 
regarded namely important element over manufactured expansion, which within the cease contributes fairly according to the enlarge 
concerning a country (Mia et al., 2014). 
 
1.2 Importance of the Problem 
Stock change is a buying and selling arrangement the area monetary means are traded then that deliver chances in conformity with 
shoppers into making lengthy epoch duration funding decisions. The morality markets, among that way, allocate the monetary 
assets efficaciously for some concerning a sort of economic purpose. The expected stock market allows investors via Faithful 
assignment on their sources because of several economic reasons or afterward comeback decrease lower back with excessive profits. 
The equity markets help of merchandising sources effectually then effectively through transferring metropolis beside one unit in 
conformity with others, where capital is being required. The markets of stock moreover significantly whack cash following 
employer zone or thereby honor the boom about a budget. The stock wants enhancement kin with economic growth; it endured 
a debatable hassle into each theoretical or empirical literature. The officials on these nations are nevertheless indecisive related to 
characteristics regarding inventory markets and thereby brainchild insurance system for upgrading concerning markets. This learns 
as regards is a try in conformity with empirically find oversea respecting this matter throughout twins' areas concerning Asia 
particularly South Asia or Malaysia. The consequences concerning learning about do remain useful for commercial enterprise 
nearby of every are among funding perspective. It can moreover facilitate traders into making good funding choices between the 
course concerning about stock markets of two regions (Moayedi & Aminfard, 2011). 
 
2 Literature Review 
Monetary development's sit together with financial increase about dialogue thinking about up to expectation last dense decades. 
Its alliances within four dimensions. The forward is supply-leading speculation who postulates so much economic development 
factors economic growth; such is moreover recognized as like finance-led increase hypothesis. The organization over sources 
execute stay viable thru raised then well-functioning monetary law yet as much a quit result it leads within the route regarding 
financial growth. The 2d is demand- similar hypothesis or additionally termed so with financial objectives. 
                      After this objective of economic up-gradation encourages the progress of monetary divisions i.e., then even is 
pecuniary rise afterward that outcomes in accelerated require because of monetary capabilities yet development concerning financial 
sectors. This is proposed together with the resource (Al Hallaq et al., 2019). The 1/3 is the remarks speculation or is the 
combination concerning advance joining faculties over thoughts while the 4th hypothesis proposes a bidirectional causal kinship 
i.e., preceding monetary enhancement enhances increase than in flip growth stimulates the economic enhancement. Inventory 
market affectivity is persuaded together with the resource about within near cases pair factors especially legislative elements or 
organizational factors. This capacity up to expectation agreement establishments disclose reliable statistics afterward that will 
inspire traders or he accomplish a performance among stock markets’ practices confidently. 

The market of stocks or banks is fundamental elements regarding monetary quarter development or each performs 
contribute to enlarging on a financial regulation positively (Levine & Zervos, 1998). The merchants execute arrive unique or well-
timed files as regards corporations besides inventory markets, due after who in that place are gambles about extending in returns 
concerning investors. They moreover argued so within an economy, boom performs stand exploited between lengthy conduct by 
way of decreasing means about thin belongings yet whole these may remain executed via stock markets. Similarly, they have stated 
as the need because of high priced yet precise statistics is reduced between environment-friendly inventory markets so whole vital 
statistics are mirrored by way of the use of inventory fees of certain markets. The large characteristic of thin inventory markets 
between boom concerning a pecuniary provision has been highlighted. The firms may stand in a position to secure wished capital 
more unexpectedly within softened stock markets or that moreover helps in useful resource division or investments. However, 
Levine & Zervos (1998) criticized that extraordinarily melted markets disheartened the amplify of 3methods. The 1st one is to 
that amount increased predictable profits of investments perform result among customers to make investments greater than that 
reduces the pecuniary financial savings rates. Secondly, the lesser doubtfulness related to funding may additionally reason a 
reduction within salvation costs and thirdly investor myopia is triggered appropriate after melted stock markets yet that situation 
is detrimental because of decreasing corporate governance and financial growth.  



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Levine & Zervos (1998) argued that inventory marketplaces defend investors towards a person's chance through a 
capacity of presenting to them portfolio investments. The investment plan has been diverted to limit restless initiatives appropriate 
according to gamble diversification. Specialization then affectivity over the monetary rule is classy through stock markets due 
following as chance is special to that amount leading economic growth. In merchandising about enlarge throughout flourished as 
much precise as, like flourishing countries, stock market's position is large then is additionally confirmed via a range over 
researchers' kind of. The international locations up to expectation hold properly developed pecuniary systems, specifically 
environment pleasant banking system, are able after embellishing increase in the United States concerning the United States of 
America (Naik & Padhi, 2015). Manufacturing economies monetary place improvement is increased surroundings friendly as 
much in distinction to the agronomy. World Bank (2000) mentioned that amount of financial markets about the world is 
becoming a feature over collectively as much ordinary marketplace. The buyers are shifting of the course of promoted nations 
according to acquire greater earnings than even are additionally probabilities about diversification regarding a quantity threat. The 
liberalization over monetary marketplaces makes it been probable after doing investment rather a country. The global merchants 
can make investments in fairness markets above global areas then are successful after diversifying their portfolios. 
                  There are distinct techniques that have been ancient together with the useful resource over researchers in imitation of 
look at the kindred on financial quarter improvement in imitation of pecuniary boom throughout wonderful countries. Levine & 
Zervos (1998) conducted his lesson about seventy-seven countries then back the age period out of 1960-1989 then utilized 
exclusive measures after test its relationship. His findings expose a tremendous kindred of monetary area improvement then growth. 
Similarly, Levine & Zervos (1998) examined forty-eight nations inside the era's impact on 1973-1993 yet concluded so stock 
demand liquid solvency encourages development. Bist (2017), however, executed a weak proof regarding this affinity between 19 
OECD countries. In partial other studies, Luintel et al. (2008) examined the alliance between monetary quadrant development or 
growth. He ancient the facts of 14 worldwide locations because of its reason yet engaged collection dashboard model then 
pronounced a magnificent effect between championship of countries. Adjasi & Yartey (2007) additionally strong this impact 
within African international locations or found a super relationship. The presence concerning causality into monetary area 
development yet boom has additionally been rendered together with the resource. On the unique facet, no such kindred over these 
two variables have been found in Bangladesh by using Mamun et al. (2018). For attaining monetary progress, the close fundamental 
aspect is after improving the market of stock concerning that amount country. Similarly, Al Hallaq et al. (2019) referred after that 
in that place are an extent over fundamental capabilities conveyed out with the aid of capacity concerning stock markets into kilter 
following embellishing pecuniary growth, as encompass reduction regarding transaction then monitoring costs. Bayar et al. (2014) 
additionally examined these kindred within Turkey at some stage from 2000-2014. He aged Johansen and Juselius co-integration 
drink a look at yet documented to that amount improvement concerning inventory markets affects the development of the 
monetary policy of lengthy run. Naik & Padhi (2015) located to that amount of monetary location improvement performance are 
excessive multiplication nearer in imitation of increase for a panel about 27 flourishing markets. As pecuniary make bigger regarding 
Asian nations is developing gradually, it is an occurrence the interest regarding many economists then officers out of closing little 
decades. Many distant places consumers are taking hobby among Asian markets particularly Taiwan which is significantly 
important, China which is the largest economic nation, Hong Kong and Indonesia and Korea, etc. The reason is over the cause as 
nations out of these areas bear big increase potentialities or variation opportunities. While an enormous composition is available 
related to imitation of the financial quarter improvement and boom a comparative finds out respecting concerning global locations 
beyond South then Malaysian areas are missing behind. The current lookup work is an effort to enter the hole into present writing 
and is meant after comparatively test the have an effect on stock demand improvement on an increase in economies chosen from 
regions.  
 
3. Research Methodology 
Panel records procedure is utilized throughout this lesson after analyzing the result on alternate improvement concerning boom 
about pattern countries. The pattern is elected from two Asian areas especially South Asia then Malaysia. the perfect IV 
international locations beyond each region are picked namely a sample. These nations keep a sizeable section about GDP then it's 
predicted to that amount prime sample is effective to keep a real representative on the total people. The sample economies embody 
Asian nation, Pakistan, Bangladesh, or Sri Lanka from South Asiatic vicinity since China, Japan, Korea, and outset beside the 
Malaysia region. The next dashboard regression model is applied because of empirical analysis:  
 

 
 
                GDP per capita quantity about the increase is employed namely a changeable extent then namely a proxy of the economic 
process. market capitalization (MC), volume price listed quantitative bracing (TVT), or turn quantitative rapport (TOR) are aged 
as freelance variables and as a proxy on change growth. Distinct variables so much may also have an effect of financial manner are 



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enclosed so management variables. These embody foreign direct funding (FDI), home bad consumption (HHCE), and degree 
concerning inflation (IR). in conformity with research the result, records of 1996-2018 are used. the information about dependent, 
freelance, yet choice financial learning variables is extracted beside a reliable web page of IBRD. 
 
4. Results 
The outline statistics over variables or concerning information has been examined. The effects over outline records are partial 
within table one below: 
 

  Table 1. Descriptive statistics 
 

 GDP MCR TVT STR FGI HHCE IR 

Mean 3.808 3.772 3.165 4.283 0.367 4.215 4.621 

Median 3.758 3.848 3.567 4.232 0.212 4.214 4.151 

Maximum 14.500 8.245 7.768 7.283 5.177 5.523 23.675 

Minimum -5.555 0.485 -6.173 0.451 -4.312 2.673 -3.112 

Std.Dev. 3.172 1.367 2.226 1.151 1.4336 0.1241 4.515 

Observations 150 150 150 150 150 150 150 

 
                The desire concerning applicable model in dashboard facts is made concerning the thought over chance quantitative 
affinity then Hausman tests. The dense absorb an appear at values suggests up to expectation mounted result model is proper 
because of that information. The panel regression along the hooked-up result model is utilized for empiric testing. Then resolve 
regression models additionally are utilized because of international locations throughout South Asian then Malaysian region. The 
outcomes on dashboard regression are brief of desk twins below:   
 

    Table 2. Influence regarding Stock Market Development concerning Economic Growth 
 

Variable  Total South Asian Region Malaysian Region 

C 32.81355** 
(14.43233) 

48.58238** 
(22.85231) 

54.65735*** 
(14.51365) 

MCR 0.632214* 
(0.372244) 

1.212772*** 
(0.475451) 

0.735738 
(1.411891) 

TVT 0.44321 
(0.256111) 

0.147889 
(0.031287) 

-0.515666 
(1.081544) 

STR 0.441184 
(0.233121) 

0.527864* 
(0.254113) 

1.124515 
(1.125437) 

FDI 0.448765 
(0.278661) 

0.484151 
(0.232225) 

0.668882** 
(0.177623) 

HHCE -7.257311** 
(0.157111) 

-11.21511** 
(6.281267) 

-13.66386*** 
(2.617175) 

IR -0.141432 
(0.153111) 

-0.123677 
(0.047618) 

-0.182633 
(0.158845) 

Adjusted R-squared 0.49 0.46 0.48 

Durbin- Watson stat 1.84 1.87 1.89 

(*****indicates significance at 10%, 5%, and 1% level respectively while values in parenthesis show standard errors)  
 

The outcomes point out so much alternate development doesn't almightily impact the financial method regarding pattern 
economies. The sickly essential result concerning only 1 indicator of change improvement is renowned. The result of choice needs 
growth point erspersistedun importantly. The comparative evaluation on two areas indicates that the amount result concerning 
change development is comparatively a tussock on pronounced inside the monetary technique over the South Asiatic region.  
 
5. Conclusion 
This education examined the effect concerning change development on the economic manner in two Asian regions mainly South 
Asia yet Malaysia. GDP per capita dimension about development is engaged namely unstable quantity, as alternate development 
warning signs are old as regresses. Researchers tend in conformity with conjoint administration some financial lore variables 



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especially overseas direct investment, home ruin charge or degree concerning inflation as may additionally without delay and 
indirectly bear an effect about the monetary process. For empirical analysis, the yearly statistics of 1996-2018 is used. The panel 
records regression methodology is engaged then because of selecting relevant mannequin probability receive a seem at yet Hausman 
exams are applied. The consequences show so trade improvement isn't powerfully causative following monetary manner regarding 
pattern countries. The comparative analysis, however, shows a comparatively stated result in the South Asiatic region. The result 
is stated according to lie dime of nations about the Malaysia region. this may result following the explanation to that amount 
among Japan yet Korea, the financial clustering provision is common anyplace the investors' team originates theirs very own bank 
together because of his or her cash transactions or choice activities. The learning is extended within the future by using as like 
properly namely a cluster of countries, regions, yet symptoms for careful and decisive evidence. 
 
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