Foreign Direct Investment and Economic Growth in Malaysia -- Re-examining Key Economic Fundamental

Abstract

The sustainable growth of Malaysia’s economy is important to ensure full employment and efficient allocation of national resources. This empirical study is motivation driven to ascertain the relevant economic dynamics that can significantly affect national gross domestic product (GDP). Using quarterly secondary data from 2015 to 2022, we employed the Johansen-Juselius cointegration test as an estimation tool. The results revealed that net foreign direct investment (NFDI) is a significant economic factor that influences national income over, both, short- and long-run. As such, this external economic factor is one of the key determinants in underpinning the effectiveness of Malaysian government’s fiscal policy. This paper analyzes Malaysian economic activities from the fiscal perspective over the past eight years. Keywords: gross domestic products, total government revenue, net export, net FDI