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The relationship between economic growth and employee provident fund: an empirical evidence from Malaysia

Author

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  • Sallahuddin Hassan
  • Zalila Othman
  • Zalina Mohd Mohaideen

Abstract

Over the years, Malaysia has progressively accelerated its economic development, thanks to the adherence to high rates of domestic savings and investment. Of which, the Employees Provident Fund (EPF) is one of the schemes that caters for the private sector workers. Specifically, this paper investigates the relationship between economic growth and EPF investment in Malaysia for the period of 1970 – 2014. The model, which is derived from the Cobb-Douglas production function, is tested by econometric techniques; Johansen cointegration and Granger causality within VECM. While the EPF investment is proven statistically insignificant in the short run, there is evidence of the saving/investment-led-growth hypothesis being the long run phenomenon for Malaysia. In view of the possible over-dependence on investment funds in generalgoing forward, the policy makers are recommended to reinforce the government’s initiative in facilitating more business ventures as means to attract incoming funds, including FDI flows, towards streaming into the country.

Suggested Citation

  • Sallahuddin Hassan & Zalila Othman & Zalina Mohd Mohaideen, 2018. "The relationship between economic growth and employee provident fund: an empirical evidence from Malaysia," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(2), pages 229-242, April.
    • Handle: RePEc:pdc:jrnbeh:v:14:y:2018:i:2:p:229-242
    DOI: 10.15208/beh.2018.18
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cobb-Douglas; economic growth; EPF investment; saving/investment-led-growth;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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