FDI and Economic Growth Relationship: An Empirical Study on Malaysia | Zendy

Wai Mun Har | Zendy; Teo Kai Lin | Zendy; Yee Kar Man | Zendy

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FDI and Economic Growth Relationship: An Empirical Study on Malaysia

Author(s) -

Wai Mun Har,

Teo Kai Lin,

Yee Kar Man

Publication year - 2009

Publication title -

international business research

Language(s) - English

Resource type - Journals

eISSN - 1913-9012

pISSN - 1913-9004

DOI - 10.5539/ibr.v1n2p11

Subject(s) - foreign direct investment , economics , ordinary least squares , international economics , capital formation , time series , monetary economics , investment (military) , real gross domestic product , international trade , macroeconomics , human capital , econometrics , economic growth , statistics , mathematics , politics , financial capital , political science , law

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%.

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