FDI and Economic Growth Relationship: An Empirical Study on Malaysia

International Business Research, Vol. 1, No. 2, pp. 11-18, April 2008

8 Pages Posted: 7 May 2009

See all articles by Wai-Mun Har

Wai-Mun Har

Universiti Tunku Abdul Rahman (UTAR)

Kai-Lin Teo

affiliation not provided to SSRN

Kar-Mun Yee

affiliation not provided to SSRN

Date Written: April 2008

Abstract

Foreign direct investment (FDI) has been an important source of economic growth for Malaysia, bringing in capital investment, technology and management knowledge needed for economic growth. Thus, this paper aims to study the relationship between FDI and economic growth in Malaysia for the period 1970-2005 using time series data. Ordinary least square (OLS) regressions and the empirical analysis are conducted by using annual data on FDI and economy growth in Malaysia over the 1970-2005 periods. The paper used annual data from IMF International Financial Statistics tables, published by International Monetary Fund to find out the relationship between FDI and economic growth in Malaysia case. Results show that LGDP, LGNI and the LFDI series in Malaysia are I(1) series. There is sufficient evidence to show that there are significant relationship between economic growth and foreign direct investment inflows (FDI) in Malaysia. FDI has direct positive impact on RGDP, which FDI rate increase by 1% will lead to the growth rate increase by 0.046072%. Furthermore, FDI also has direct positive impact on RGNI because when FDI rate increase by 1 %, this will lead the growth increase by 0.044877%.

Keywords: Growth, FDI inflows, FDI and growth relationship, Malaysia’s economy

JEL Classification: F21

Suggested Citation

Har, Wai-Mun and Teo, Kai-Lin and Yee, Kar-Mun, FDI and Economic Growth Relationship: An Empirical Study on Malaysia (April 2008). International Business Research, Vol. 1, No. 2, pp. 11-18, April 2008. Available at SSRN: https://ssrn.com/abstract=1398282

Wai-Mun Har (Contact Author)

Universiti Tunku Abdul Rahman (UTAR) ( email )

Sungai Long Campus Lot PT 21144
Bandar Sg. Long, Cheras, Selangor D.E.,
Bandar Sungai Long, 43000
Malaysia

Kai-Lin Teo

affiliation not provided to SSRN ( email )

Kar-Mun Yee

affiliation not provided to SSRN ( email )

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