Business Credit, Household Credit and Economic Performance in Malaysia: A Quantile Regression Approach

Abstract

This study examines the effects of business (enterprise) credit and household credit on economic performance in Malaysia. The World Bank’s Doing Business report ranked Malaysia at number one among developing countries in terms of ease of getting credit in the six consecutive years since 2008. The analysis is based on quantile regression estimations, using quarterly time series datasets from 1999: Q4 to 2019: Q4. The empirical findings reveal that business credit is positively associated with economic performance whereas household credit is an insignificant determinant of economic performance. We also consider the interaction between credit and institutional quality, an emerging key fundamental variable that determines economic performance. The results demonstrate that only the interaction term between business credit and institutions is statistically significant. In short, business credit outperforms household credit in promoting economic performance in Malaysia. The empirical findings are robust to alternative control variables and quantile regression estimation techniques.