Estimating an optimal threshold value for foreign investment in Malaysia

Abstract

Economists unanimously agree that foreign direct investment (FDI) somehow brought about economic growth and development. In this paper, we re-examine this popular view by estimating an optimal threshold value needed to promote growth. Results show that FDI enhances growth only if it is more than 3.14 percentage of GDP in the case of Malaysia. Hence, policy enablers should ensure an annual increase of FDI influx of more 3.14 percent of GDP to ensure positive and sustainable growth.