Impact of political instability on foreign direct investment and Economic Growth: Evidence from Malaysia
Abdul Malik Nazeer and
Abul Masih ()
MPRA Paper from University Library of Munich, Germany
Based on many studies, economic theories and real life experiences, we can understand that political instability has been a harmful factor that would hinder the flow of FDI and the growth of an economy. In our study, we would like to focus on Malaysia, which had its fair share of political instability issues due to the differences and existence of various races. But based on recent studies, it is considered a politically stable economy. Despite everything, Malaysia has been able to achieve consistent economic growth, therefore we believe Malaysia is an interesting country to explore further. This paper aims to analyze the impact of political instability on foreign direct investment and on economic growth of Malaysia. This study employs autoregressive distributed lag (ARDL) approach to cointegration proposed by Pesaran et al. (2001). It is based on a time series data over the period of 30 years ranging from 1984 to 2013. There has been no studies identified yet to our knowledge which has investigated the causal relationships between political instability, FDI and economic growth for Malaysia. Our study aims to fill this gap in literature and would be of great use for the policy makers and key decision makers of the economy. The empirical results reveal that there are both long and short run relationship between political instability, FDI and economic growth in Malaysia, with economic growth being the strongest driver for political instability and FDI. These findings have clear policy implications in that the government of Malaysia can make use of it by targeting the growth in the economy to impact FDI and political instability.
Keywords: political instability; foreign direct investment; economic growth; Malaysia; ARDL (search for similar items in EconPapers)
JEL-codes: C58 E44 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-mac, nep-pol and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/79418/1/MPRA_paper_79418.pdf original version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:79418
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().