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Empirical Analysis of Employment and Foreign Direct Investment in Malaysia: An ARDL Bounds Testing Approach to Cointegration

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  • Stan Lee Shun Pinn
  • Kok Sook Ching
  • Mori Kogid
  • Dullah Mulok
  • Kasim Mansur
  • Nanthakumar Loganathan

Abstract

This study examines the relationships between the employment and foreign direct investment (FDI) in Malaysia. The Malaysian government continues to put efforts in attracting more FDI inflows as it seems that FDI plays a major role in the economic development of Malaysia. Besides, there is general perception that the FDI inflow contributes to increase the employment opportunity in the country. Hence, we apply an empirical analysis to study the effect of FDI on the employment in Malaysia. The data span from 1970 to 2007. Several econometric models are applied including the bounds testing (ARDL) approach, and ECM-ARDL model. The results show that there is no cointegration relationship between employment and the FDI in the long-run. However, there is a causal relation between employment and FDI running from FDI to the employment. This study concluded that the FDI is found to be the significant factor contributing to the employment growth in Malaysia, but not the other way round.

Suggested Citation

  • Stan Lee Shun Pinn & Kok Sook Ching & Mori Kogid & Dullah Mulok & Kasim Mansur & Nanthakumar Loganathan, 2011. "Empirical Analysis of Employment and Foreign Direct Investment in Malaysia: An ARDL Bounds Testing Approach to Cointegration," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 1(3), pages 1-4.
    • Handle: RePEc:spt:admaec:v:1:y:2011:i:3:f:1_3_4
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    Cited by:

    1. Thomas Habanabakize & Daniel Francois Meyer & Judit Oláh, 2019. "The Impact of Productivity, Investment and Real Wages on Employment Absorption Rate in South Africa," Social Sciences, MDPI, vol. 8(12), pages 1-15, December.
    2. Lay, Jann & Tafese, Tevin, 2020. "Promoting private investment to create jobs: A review of the evidence," PEGNet Policy Studies 02/2020, PEGNet - Poverty Reduction, Equity and Growth Network, Kiel Institute for the World Economy (IfW Kiel).
    3. Bongumusa Prince Makhoba & Irrshad Kaseeram, 2019. "The Contribution of Foreign Direct Investment (FDI) To Domestic Employment Levels in South Africa: A Vector Autoregressive Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 11(1), pages 110-121.
    4. Yilmaz Bayar & Mahmut Unsal Sasmaz, 2017. "Impact of Foreign Direct Investments on Unemployment in Emerging Market Economies: A Co-integration Analysis," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 10(3), pages 90-96, September.
    5. Kazi Mohammed Kamal Uddin & Munem Ahmad Chowdhury, 2020. "Impact of FDI on Employment Level in Bangladesh: A VECM Approach," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 8(1), pages 30-37.

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