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The relationship between trade openness, foreign direct investment and growth: Case of Malaysia

Author

Listed:
  • Baharom, A.H.
  • Habibullah, M.S.
  • Royfaizal, R. C

Abstract

This study examines the role of trade openness and foreign direct investment in influencing economic growth in Malaysia during 1975-2005, using the Bounds testing approach suggested by Pesaran et al. (2001). The empirical results demonstrate that trade openness is positively associated and statistically significant determinant of growth, both in short run and the long run. The result also suggested that foreign direct investment is positively associated in the short run and negatively associated in the long run, both significantly. Besides these two variables, the other control variable namely exchange rate is also significant in the short run as well as in the long run.

Suggested Citation

  • Baharom, A.H. & Habibullah, M.S. & Royfaizal, R. C, 2008. "The relationship between trade openness, foreign direct investment and growth: Case of Malaysia," MPRA Paper 11928, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:11928
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    File URL: https://mpra.ub.uni-muenchen.de/11928/1/MPRA_paper_11928.pdf
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    References listed on IDEAS

    as
    1. Mahadevan, Renuka & Suardi, Sandy, 2008. "A dynamic analysis of the impact of uncertainty on import- and/or export-led growth: The experience of Japan and the Asian Tigers," Japan and the World Economy, Elsevier, vol. 20(2), pages 155-174, March.
    2. Joshua J. Lewer & Hendrik Van den Berg, 2003. "How Large Is International Trade’s Effect on Economic Growth?," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 363-396, July.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kong, Qunxi & Peng, Dan & Ni, Yehui & Jiang, Xinyue & Wang, Ziqi, 2021. "Trade openness and economic growth quality of China: Empirical analysis using ARDL model," Finance Research Letters, Elsevier, vol. 38(C).
    2. Yapatake Kossele Thales Pacific, 2015. "Foreign Direct Investment in Anglophone and Francophone African Countries," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(11), pages 337-350, November.
    3. Vu Manh Hoai Nguyen & Tin Huu Ho & Luan Huynh Nguyen & An Thi Ha Pham, 2023. "The Impact of Trade Openness on Economic Stability in Asian Countries," Sustainability, MDPI, vol. 15(15), pages 1-20, July.
    4. Khaing, Khaing Sape Saw, 2007. "Globalization and Change of Investment Environment in ASEAN," MPRA Paper 42003, University Library of Munich, Germany.

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    More about this item

    Keywords

    trade openness; foreign direct investment; economic growth; Malaysia;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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