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Hot money and economic performance: An empirical analysis

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  • Duasa, Jarita
  • Kassim, Salina

Abstract

The present study empirically examines the importance of foreign portfolio investment (FPI) or hot money from certain investor(s) or country(s) on Malaysian economic performance. In methodology, the study uses vector error correction (VECM) model of FPI inflows from major investors such as the United States, United Kingdom, Singapore and Hong Kong and Malaysian real GDP using quarterly data covering the period of Q1:1991 to Q3:2007. For further inferences, the study adopts an innovation accounting by simulating variance decompositions (VDC) and impulse response functions (IRF). It is found that the country’s GDP is highly attributable to UK FPI inflow especially in the long run.

Suggested Citation

  • Duasa, Jarita & Kassim, Salina, 2008. "Hot money and economic performance: An empirical analysis," MPRA Paper 12470, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12470
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    References listed on IDEAS

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    Cited by:

    1. Gamze ŞEKEROĞLU & Melek ACAR, 2020. "The effect of hot money on stock exchange index exchange rates and interest rates: the case of Turkey," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 12(3), pages 213-227, December.

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    More about this item

    Keywords

    Foreign portfolio investment; Economic performance; VECM; Impulse Response; Variance Decomposition;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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