FLOOD DISASTER AND GDP GROWTH IN MALAYSIA

Abstract

This paper seeks to examine the impact of flood disaster on GDP growth in Malaysia for the period of 1960 to 2013 by applying the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration and the error correction model (ECM) for short run relationship.ADF, PP and KPSS unit root test examines the stationarity of the series. The results show that the series are cointegrated.The findings suggest that all four flood variables significantly affecting GDP growth in both long run and short run.The results of the study have important implications for the GDP growth in both long run and short run.First, the government should have a proper flood mitigation plan so as to avoid the negative impact of flood on GDP growth in the long run.Second, prepare sufficient stockpiles of basic necessities in a safe place to avoid shortages and temporary setback in the short run.