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Foreign direct investment and economic growth in Malaysia: the role of domestic financial sector


Choong, Chee Keong and Yusop, Zulkornain and Soo, Siew Choo (2005) Foreign direct investment and economic growth in Malaysia: the role of domestic financial sector. The Singapore Economic Review, 50 (2). pp. 245-268. ISSN 0217-5908; ESSN: 1793-6837


This study aims to incorporate the role of domestic financial system in transferring the technological diffusion embodied in FDI inflows on the Malaysian economy from 1970–2001. Applying bound test, or unrestricted error correction model (UECM) proposed by Pesaran et al. (2001), the presence of FDI inflows creates a positive technological diffusion in both short- and long-run if the evolution of domestic financial system has achieved a certain minimum level. This implies that the improvement of technology level in Malaysia in the long run is due to the spillover efficiency effects from FDI. Hence, the study suggests that FDI tends to be more likely to enhance economic growth more efficiently when a recipient country has a well-developed and well-functioning financial sector.

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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
DOI Number: https://doi.org/10.1142/S0217590805001998
Publisher: World Scientific Publishing
Keywords: Financial development; Foreign direct investment; Economic growth; Bound test; Technological diffusion
Depositing User: Nabilah Mustapa
Date Deposited: 05 Apr 2017 05:32
Last Modified: 05 Apr 2017 05:32
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1142/S0217590805001998
URI: http://psasir.upm.edu.my/id/eprint/51644
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