THE RELATIVE CONTRIBUTIONS OF DOMESTIC AND FOREIGN DIRECT INVESTMENTS AND EXPORTS TO MALAYSIA'S ECONOMIC GROWTH

Chor Foon Tang and Eu Chye Tan
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Eu Chye Tan: Department of Economics, Faculty of Economics and Administration, University of Malaya, 50603 Kuala Lumpur, Malaysia

The Singapore Economic Review (SER), 2015, vol. 60, issue 02, 1-20

Abstract: The objective of this study is to assess the roles of domestic direct investment, foreign direct investment and exports as catalysts of Malaysia's economic growth using cointegration and Granger causality test techniques. To address the dynamics in the growth relationships, the study also performs time-varying regression and variance decomposition analyses. It covers the quarterly sample period from 1991:Q1 to 2010:Q2. The econometric results suggest that all the three variables have a positive impact on economic growth and thus are catalytic to economic growth. However, the growth effect of domestic direct investment is more stable than that of the other two growth determinants. Contrary to earlier empirical studies, the variance decomposition analysis herein reveals that domestic direct investment is the most important determinant of growth in the long-run (L-R) compared to exports and foreign direct investment.

Keywords: Catalysts of growth; domestic direct investment; exports; FDI; Malaysia; stability; C22; E22; O16; O53 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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DOI: 10.1142/S0217590815500113

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