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Research Article Open access CC BY 3.0

The Export Led-Growth and FDI Led-Growth Nexus in Malaysia: Evidence from ARDL Analysis

Maymunah Ismail, Maizatul Saadiah, Abdul Rahim Ridzuan, Elsadig Musa Ahmed

Advances in Research · pp. 240–249 · Published 24 Mar 2014

10.9734/AIR/2014/8729

Abstract

This paper investigates the relationship between foreign direct investment (FDI) and export (X) towards Malaysia’s economic growth over the period 1980 to 2011. Most past empirical studies observed that both FDI and export are the important sources of economic growth especially after the country’s liberalization in 1986. The interest of this paper is to find out which determinant contributes higher for the growth by applying recent time series analysis known as Autoregressive Distributive Lag (ARDL) approach proposed by Pesaran (2001) by modifying the standard Cobb Douglas production function. The results confirmed that determinant; FDI and export are positively correlated with higher growth and will be converge in the long run. Based on the contribution, export is proven to contribute more than FDI for the growth of Malaysian economy. The outcome of this analysis can give important insight to the policymaker so that Malaysia will not lose track in competing with other rising Asian countries. The lack of FDI and income received from export activities may constrain to economic growth and vice versa.  

GDP ARDL Export foreign direct investment

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