Public Health Spending and GDP per Capita in Malaysia: Does the Lucas Critique Apply?

  • Abdalla Sirag Universiti Putra Malaysia
  • Norashidah Mohamed Nor Universiti Putra Malaysia
  • Peter Adamu Kaduna State University
  • Wency Bui Kher Thinng Universiti Putra Malaysia

Abstract

This study re-examined the public health expenditure and GDP per capita nexus, applying the super exogeneity test developed by Engle and Hendry (1993). We utilised time series annual data for Malaysia from 1970 to 2013, during which the country had witnessed a noticeable increase in Gross Domestic Product and various regime shifts, namely, the “Malaysian Incorporated” policy in 1983, Asian financial crisis in 1998 and the Global financial crisis in 2008. The results of super exogeneity test show that public health expenditure is weakly exogenous and in variance to the policy shifts that have taken place, and therefore it is super exogenous for the parameters of the estimated model. In other words, health expenditure from the public source of financing promotes GDP per capita improvement and Lucas critique does not hold in the case of Malaysia.

Author Biographies

Abdalla Sirag, Universiti Putra Malaysia

Department of Economics, Universiti Putra Malaysia

Norashidah Mohamed Nor, Universiti Putra Malaysia

Department of Economics, Universiti Putra Malaysia

Peter Adamu, Kaduna State University

Department of Economics, Faculty of Social and Management Sciences, Kaduna State University

Wency Bui Kher Thinng, Universiti Putra Malaysia

Department of Economics, Universiti Putra Malaysia

Published
2017-06-01
How to Cite
SIRAG, Abdalla et al. Public Health Spending and GDP per Capita in Malaysia: Does the Lucas Critique Apply?. Malaysian Journal of Economic Studies, [S.l.], v. 53, n. 2, p. 211-226, june 2017. ISSN 1511-4554. Available at: <https://mjes.um.edu.my/article/view/2769>. Date accessed: 20 sep. 2017.
Section
Articles