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Effects of fiscal components on economic growth: evidence from Malaysia

Author

Listed:
  • Samad, Esma
  • Masih, Mansur

Abstract

The focus of this paper is to investigate the effect of foreign direct investment, employment, private consumption and national savings on GDP. The standard time series techniques are used for the analysis. Malaysia is taken as a case study. These variables are bound together by a theoretical relationship as evidenced in their being cointegrated. The findings based on the generalised variance decomposition(VDC) technique tend to indicate that the GDP is driven mostly by the foreign direct investment and followed by employment and private consumption. The foreign direct investment appears to be the crucial exogenous variable to initiate economic growth. The policy makers are, therefore, advised to encourage foreign direct investment to enhance economic growth.

Suggested Citation

  • Samad, Esma & Masih, Mansur, 2018. "Effects of fiscal components on economic growth: evidence from Malaysia," MPRA Paper 110224, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:110224
    as

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    References listed on IDEAS

    as
    1. Von Furstenberg, George M. & Green, R. Jeffery & Jeong, Jin-Ho, 1985. "Have Taxes Led Government Expenditures? The United States as a Test Case," Journal of Public Policy, Cambridge University Press, vol. 5(3), pages 321-348, August.
    2. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    3. Ghali , Khalifa H. & Al - Shamsi, Fatima, 1997. "Fiscal Policy and Economic Growth: A Study Relating to the United Arab Emirates," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 50(4), pages 519-533.
    4. Muhammad Arshad Khan & Shujaat Ali Khan, 2011. "Foreign Direct Investment and Economic Growth in Pakistan: A Sectoral Analysis," PIDE-Working Papers 2011:67, Pakistan Institute of Development Economics.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    fiscal components; GDP; VECM; VDC; Malaysia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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