Estimating the Domestic Determinants of Foreign Direct Investment Flows in Malaysia: Evidence from Cointegration and Error-Correction Model

Marial A.Yol, Ngei Teng Teng

Abstract


This study investigates the domestic short-run and long-run factors that influence FDI flows into Malaysia using annual data over period 1975 - 2006. After ascertaining that the series are I(0), the cointegration test statistics identuify three cointegration relations among the series, which implies an existance of long-run FDI equalition indicate that FDI flows in Malaysia are possitively influenced by real exchange rate, GDP growth and infrastructure while negatively by exports. In the short run, FDI flows are negatively influenced by its own lags, GDP growth, infrastructure and exports, while positively affected by economy's openness and real exchange rate variables. The error-correction term suggests taht approxiamately 12 percent of total disquilibrium in FDI flows was being corrected ineach year in Malaysia across the study period.

ABSTRAK

Kajian ini menyelidik faktor-faktor jangka masa pendek dan jangka masa panjang domestik yang mempengaruhi aliran Pelaburan Langsung Asing (FDI) di Malaysia menggunakan data tahunan untuk tempoh masa 1975 - 2006. Selepas memastikan siri adalah I(0), statistik ujian kointegrasi mengenalpasti tiga hubungan jangka masa panjang antara siri, yang menggambarkan kewujudan hubungan jangka masa panjang antara pembolehubah dalam kajian ini. Keputusan persamaan FDI jangka masa panjang memberi gambaran aliran FDI di Malaysia dipengaruhi secara positif oleh kadar pertukaran benar, pertumbuhan GDP dan infrastruktur dan secara negatif oleh eksport.Dalam jangka masa pendek, aliran FDI dipengaruhi secara negatif oleh pembolehubah latnya sendiri, pertumbuhan GDP, infrastruktur dan eksport, dan secara positif olek keterbukaan ekonomi dan kadar pertukaran benar. terma pembetulan ralat (ECT) mencadangkan bahawa lebih kurang 12 peratus ketidakseimbangan dalam aliran FDI diperbetulkan setiap tahun di Malaysia sepanjang tempoh kajian.


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