Foreign Direct Investment in Malaysia: An Economic Analysis

Chee-Keong Choong and Kian-Ping Lim

The IUP Journal of Applied Economics, 2007, vol. VI, issue 1, 74-85

Abstract: This paper investigates the significance of market size hypothesis, skilled labor and liberalization process in determining Foreign Direct Investment (FDI) in Malaysia from 1970 to 2001. The newly developed Autoregressive Distributed Lag (ARDL) model, or bounds test proposed by Pesaran, et al. (2001) is applied to model the relationship. While local market size significantly influences the inflows of FDI in the Malaysian economy, the market size of its competitor, China exhibits a negative influence on the inflows. The findings are consistent with a generally hypothesized market size theory. Skilled labor and liberalization process have an independent positive impact on the inflow of FDI in Malaysia.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjae:v:06:y:2007:i:1:p:74-85

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