The relationship between foreign direct investment (FDI) and economic growth in Malaysia

Sharon, Martin (2022) The relationship between foreign direct investment (FDI) and economic growth in Malaysia. [Final Year Project Report] (Unpublished)

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Abstract

This study's goal is to examine the connection between Malaysia economic growth and Foreign Direct Investment (FDI) from 1990 to 2020. GDP was used as a dependent variable and a proxy for economic growth, while FDI abd exports were employed as independent variables in the study. The empirical analysis employs unit root tests (ADF and PP test). Autoregression Distributed Lag (ARDL) test, and Granger causality test to determine the order of cointegration and relationship of the variable employed in the model. The empirical research revealed that all variables have been stationary at first different and that there is a long-run link between the variables. According to the study, GDP and FDI have a positive but not sifnificant association, while GDP and exports have a positive link and it was significant. The Grager causality test reveals a one-way causality connection between GDP and exports in the direction of FDI. This study has make some recommendation for new policy related to attract more foreign investors in order to boost the national economy.

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