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Empirical Analysis of the Relationships between inward FDI and Business Cycles in Malaysia

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  • Manal Omer
  • Liu Yao

Abstract

Globalization has been spreading macro economic effects around the world as well as fueling firms’ cross-national activities. Are there any links between these two influences? This paper chose Malaysia as subject and examined the causal relationships between inward foreign direct investment (FDI) and business cycles. A set of models based on Granger Causality test and VAR Impulse Responses were constructed. Time-series data covered from 1970 to 2008. And the findings clearly indicated that in the case of Malaysia, there is evidence of bi-directional causality and long-run relationships between firms’ (foreign) activities (inward FDI) and business cycle developments in a long term.

Suggested Citation

  • Manal Omer & Liu Yao, 2011. "Empirical Analysis of the Relationships between inward FDI and Business Cycles in Malaysia," Modern Applied Science, Canadian Center of Science and Education, vol. 5(3), pages 157-157, June.
    • Handle: RePEc:ibn:masjnl:v:5:y:2011:i:3:p:157
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    References listed on IDEAS

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    1. Claudia M. Buch & Alexander Lipponer, 2005. "Business Cycles and FDI: Evidence from German Sectoral Data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(4), pages 732-759, December.
    2. Fabio Ghironi & Marc J. Melitz, 2005. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 865-915.
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    4. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    5. Brems, Hans, 1970. "A Growth Model of International Direct Investment," American Economic Review, American Economic Association, vol. 60(3), pages 320-331, June.
    6. Phillips, Peter C. B., 1998. "Impulse response and forecast error variance asymptotics in nonstationary VARs," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 21-56.
    7. M Salehizadeh, 2005. "Foreign Direct Investment Inflows and the US Economy: An Empirical Analysis," Economic Issues Journal Articles, Economic Issues, vol. 10(2), pages 29-50, September.
    8. Henrik Hansen & John Rand, 2006. "On the Causal Links Between FDI and Growth in Developing Countries," The World Economy, Wiley Blackwell, vol. 29(1), pages 21-41, January.
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    10. Karimi, Mohammad Sharif & Yusop, Zulkornain, 2009. "FDI and Economic Growth in Malaysia," MPRA Paper 14999, University Library of Munich, Germany.
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    Cited by:

    1. Sheng-Ping Yang, 2024. "The Determinants and Growth Effects of Foreign Direct Investment: A Comparative Study," JRFM, MDPI, vol. 17(12), pages 1-21, November.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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