The Impact of Stock Market Development, Covid-19, and Selected Macroeconomic Variables on Economic Growth in Malaysia

Abstract

Economic growth is a significant indicator of a country’s sustainable economic performance. In Malaysia, economic growth is driven by domestic and international factors. This study assesses the influences of stock market development, COVID-19, capital formation, trade openness, and unemployment on Malaysia’s economic growth. Employing annual data covering the period from 1982 to 2024, this study uses the Autoregressive Distributed Lag (ARDL) bounds testing approach to investigate both the short-run and long-run relationships among the selected variables. The findings show that trade openness and capital formation have influenced the Malaysian economy positively.  Meanwhile, the COVID-19 pandemic has found to have a negative and significant effect on economic growth, implying the detrimental effects of the pandemic on the national production. Unemployment and stock market development are found to have insignificant impacts on economic expansion in the long run. These findings emphasize the importance of promoting capital investment and international trade activities while strengthening the sustainability of the Malaysian economy to the global shocks. The study also offers valuable policy implications for supporting the sustainable economic expansion, fostering financial market development, and formulating sound policy responses to future economic disturbances. The findings also contribute to the body of literature on this area.