Debt Sustainability And Economic Growth In Malaysia

Tuang, Geng Qiang (2016) Debt Sustainability And Economic Growth In Malaysia. [Final Year Project Report] (Unpublished)

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Abstract

The general objective of this study are to investigate the relationship between external debt and economic growth in Malaysia. In addition, this study also examine whether the Malaysia's external debt is consistent with a sustainability path. To achieve the general objective, the annual data of growth rate in GDP per capita (GDP) and ratio of external debt to GDP (EDY) are covered from 1975 to 2014. Besides, the annual data that covered from 2001 to 2013 are used to test the second purpose of this study. Based on the empirical results, it shows that the variable of GDP is I(0) whereas the EDY is I(1). Moreover, the empirical results also provide the evidence of the existence of long run relationship between GDP and EDY with one cointegrating vector. Furthermore, based on the results of VECM test, it shows that this study consist of one long run causality relationship between GDP and EDY. However, there is no short run causality relationship between GDP and EDY based on the VECM based Granger causality test. Apart from that, the results of EDD equation indicate that the external debt in Malaysia is consisting on a sustainability path.

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