Impact of Foreign Direct Investment & Domestic Investment on Economic Growth of Malaysia

  • Masoud Rashid Mohamed Zanzibar University
  • Keshminder Singh Jit Singh Universiti Technologi MARA
  • Chung-Yee Liew Universiti Putra Malaysia

Abstract

In this paper, we apply vector error correction modeling (VECM) to 1970-2008 data. The objective is to analyse the long-run causal relationship between foreign direct investment (FDI), domestic investment (DI) and economic growth in Malaysia. The presence of complementary/substitution effect between FDI and DI is also investigated using impulse response function and variance decomposition analysis. The results suggest a long-run bilateral causality between economic growth and DI. There is no evidence of causality between FDI and economic growth. On the other hand, the results suggest a short-run crowding-in effect between FDI and DI.

Author Biographies

Masoud Rashid Mohamed, Zanzibar University

Department of Economics, Zanzibar University

Keshminder Singh Jit Singh, Universiti Technologi MARA

Faculty of Business Management, Universiti Teknologi MARA

Chung-Yee Liew, Universiti Putra Malaysia

Faculty of Economics and Management, Universiti Putra Malaysia

Published
2017-06-04
How to Cite
MOHAMED, Masoud Rashid; JIT SINGH, Keshminder Singh; LIEW, Chung-Yee. Impact of Foreign Direct Investment & Domestic Investment on Economic Growth of Malaysia. Malaysian Journal of Economic Studies, [S.l.], v. 50, n. 1, p. 21-35, june 2017. ISSN 1511-4554. Available at: <https://mjes.um.edu.my/article/view/2866>. Date accessed: 23 sep. 2017.
Section
Articles