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The Relationship between Investment and Economic Growth in Malaysia

Author

Listed:
  • Mahmoud Khalid Almsafir
  • Zurina Mohammad Morzuki

Abstract

Malaysia has undergone rapid economic growth since 1960s. Identifying its determinants is essential in describing the economic performance of the country. Thus the purpose of this paper is to investigate the relationship between foreign direct investment (FDI), domestic investments and economic growth in Malaysia. Using time series data for a period of 20 years from 1994 to 2013 sourced from the World Bank, multi regression model is applied to analyse the relationship between FDI, public investment, private investment and gross domestic product (GDP). The results show that both public and private investment are significantly correlated with GDP while FDI is insignificantly correlated with GDP. It is noted that all the independent variables are positively related to the dependent variable with public investment has the most influence on GDP, suggesting that investment spur economic growth of Malaysia. Therefore the government of Malaysia must pay high attention to investment in their policy framework to enhance economic growth. However it is crucial to ensure that the policy for promoting FDI would augment rather than hinder the economic growth of Malaysia.

Suggested Citation

  • Mahmoud Khalid Almsafir & Zurina Mohammad Morzuki, 2015. "The Relationship between Investment and Economic Growth in Malaysia," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 4(2), pages 116-126.
    • Handle: RePEc:rss:jnljee:v4i2p6
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    References listed on IDEAS

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    1. Strike Mbulawa, 2021. "Trade and Investment Led Growth in Southern African Development Community (SADC)," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 9(2), pages 79-88.

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