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The Impact of Foreign Direct Investment, Labour Force, and External Debt on Economic Growth in Indonesia and Malaysia

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  • Cahyadin, Malik

    (Universitas Sebelas Maret Jl. Ir. Sutami No.36 A Pucangsawit Kec. Jebres Kota Surakarta Jawa Tengah 57126 INDONESIA)

  • Sarmidi, Tamat

    (Fakulti Ekonomi dan Pengurusan Universiti Kebangsaan Malaysia 43600 UKM Bangi Selangor MALAYSIA)

Abstract

The study aims to estimate the impact of Foreign Direct Investment (FDI), labour, and external debt on economic growth in Indonesia and Malaysia over the period 1980-2016. The findings are expected to serve as a reference for macroeconomic policies in Indonesia and Malaysia. Employing an Autoregressive Distributed Lag Model (ARDL) and Error Correction Model (ECM), we find that FDI, labour force and external debt have a significant impact on the economic growth in the long- and short- run in both countries. Statistically, the estimated models are stable. Therefore, it is recommended that the authorities in Indonesia and Malaysia should concentrate on attracting more quality FDI inflows and properly manage external debts as well as high-skilled labour force, which are vital to economic growth.

Suggested Citation

  • Cahyadin, Malik & Sarmidi, Tamat, 2019. "The Impact of Foreign Direct Investment, Labour Force, and External Debt on Economic Growth in Indonesia and Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(1), pages 171-185.
    • Handle: RePEc:ukm:jlekon:v:53:y:2019:i:1:p:171-185
    DOI: http://dx.doi.org/10.17576/JEM-2019-5301-14
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    References listed on IDEAS

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    Cited by:

    1. Kurniasih, Erni Panca, 2021. "The Effect of Foreign Debt on the Economic Growth," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(3), pages 125-136.

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