THE IMPACT OF INFLATION, REAL INTEREST RATE, FOREIGN DIRECT INVESTMENT, AND HOUSEHOLD CONSUMPTION EXPENDITURE ON ECONOMIC GROWTH: EVIDENCE FROM MALAYSIA

Lee, Bei Kee (2022) THE IMPACT OF INFLATION, REAL INTEREST RATE, FOREIGN DIRECT INVESTMENT, AND HOUSEHOLD CONSUMPTION EXPENDITURE ON ECONOMIC GROWTH: EVIDENCE FROM MALAYSIA. [Final Year Project Report] (Unpublished)

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Abstract

The study aims to investigate the nexus between several macroeconomic variables and economic growth in Malaysia from 1990 to 2019 by using the times series analysis. Inflation, real interest rate, foreign direct investment, and household consumption expenditure were employed as the explanatory variables, while the Malaysian real economic growth was employed as explained variable. In this study, unit root tests were employed to test the stationarity of the data. Furthermore, Johansen Juselius Cointegration test and Granger Causality test based on the Vector Error Correction Model were conducted to investigate the interaction among the series in both long and short run. This research also conduct the dynamic analysis to investigate the relationship beyond the sample. The empirical finding reveals the existence of long-term association among the variables. Furthermore, the outcome of Granger Causality test reveals that there is a unidirectional causality running from FDI to all the variables.

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