Using error-correction mechanism (ECM) test, the study has re-confirmed that no long run relationship of the output between foreign banks and domestic banks in Malaysia. This finding re-confirms the previous work by Tang (2001). Some policy implications have been noted in this study.
Introduction
The study aims to re-examine the presence of a long run relationship between foreign banks and domestic banks in Malaysia, using ECM (error-correction mechanism) test that developed by Banerjee, et al. (1998). The ECM test accounts for the number of regressors (k) and the number of observations (T) used in cointegration analysis. However, previous study (Tang. 2001) does not …