Open AccessEffect of Economic Recession on Development Expenditure, Domestic Investment and Foreign Direct Investments In Malaysia
Author(s) -
Aainaa Izzati Azman,
Nor Ermawati Hussain,
Jaharudin Padli
Publication year - 2019
Publication title -
universiti malaysia terengganu journal of undergraduate research
Language(s) - English
Resource type - Journals
ISSN - 2637-1138
DOI - 10.46754/umtjur.v1i2.70
Subject(s) - recession , foreign direct investment , granger causality , economics , error correction model , investment (military) , johansen test , monetary economics , global recession , gross private domestic investment , macroeconomics , international economics , cointegration , return on investment , open ended investment company , production (economics) , econometrics , politics , political science , law
Malaysia is also affected by the economic crisis as it applies the door-to-door policy economy even though the crisis has started on a global platform. Therefore, the objective of this study is to see how far economic recession affects development expenditure, domestic investment, and foreign direct investment in Malaysia. Using secondary data from 1980 to 2015, unit root tests, Johansen co-integration test, Vector Error Correction Model (VECM), and Granger-causality test were carried out. The findings showed that there was a long run relationship between the economic recession and at least one independent variable while there was no short run relationship between the variables. For causal relationships, the economic recession was the cause of domestic development and investment expenditure while foreign direct investment was the cause of the recession, domestic development, and investment spending. Hence, the government must ensure economic stability by implementing various policies.