Stock markets and economic growth: a comparative analysis between Islamic and conventional markets in Malaysia
This paper aims at examining the impact of Islamic and conventional stock markets upon the macroeconomic performance in Malaysia. Real GDP is used to represent economic growth; while Islamic market capitalisation ratio and conventional market capitalisation ratio are used to indicate the Islamic and conventional stock market development, respectively. Investment ratio and GDP deflator are added as controlled variables for both models. The results shows there is a bidirectional relationship between Islamic stock markets and economic growth in Malaysia, and the contribution towards the economic growth is seemed to be indirectly through its impact on investment. On the other hand, there is a unidirectional relationship between conventional stock markets and economic performance in Malaysia, in which the development of conventional stock market causes the growth. Interestingly, the impact of the development on conventional stock market upon economic growth is more than the impact of the Islamic one. The exogeneity test shows that both the Islamic and conventional stock markets development is found to be super exogenous.