The Impact of Capital Market Instruments on Malaysian Economic Growth

The relationship between capital market instruments and economic growth in countries has been quite a topic of debate and research in recent years. Financial markets, whether they are based on capital markets or banks, are essential to one nation’s growth. Its major purpose of serving as the government’s and enterprises’ primary source of finance gives it prominence and authority. This study analyses the causal-effect relationship of stock, bond, sukuk, and foreign exchange markets towards Malaysian economic growth. It aims to appraise the role of capital markets instruments in advancing Malaysian economic growth using the Autoregressive distributed lag (ARDL) method. Although many have studied how capital market instruments affect economic growth, this research intends to fill the absence of that research by offering a comprehensive study on the cumulative effects of capital market instruments towards Malaysian economic growth. A thorough examination that considers the significant and positive influence of stock, bond, Sukuk and foreign exchange markets on Malaysian economic growth will offer a deeper knowledge of their actual meaning to economic growth and insightful analysis that will help academics, investors, and policymakers create strategies and policies that would promote Malaysia’s sustainable economic growth. The findings of this study are stock, bond, Sukuk and foreign exchange markets have a positive impact on economic growth both in the long and short runs. On the other hand, this study found that the sum of bond and sukuk market is statistically significant in the short run.