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What's Driving Private Investment in Malaysia? Aggregate Trends and Firm-Level Evidence

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  • Olaf Unteroberdoerster
  • Roberto Pereira Guimarães
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    Abstract

    Private sector investment has been a key source of growth in Malaysia over the last three decades, but after an unprecedented decline in the wake of the Asian crisis it has remained sluggish in recent years. Using aggregate and firm-level data, this paper aims to explain these trends and their implications for Malaysia's investment and growth outlook. Aggregate data point to sustained overinvestment in the years prior to the Asian crisis and the role of shifts in investor perceptions as important determinants of the recent decline in private investment. Meanwhile, firm-level data suggest that low profitability, along with financing constraints affecting smaller firms and those in the services sector, has also been important.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/190.

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    Length: 26
    Date of creation: 01 Aug 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/190

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    Related research

    Keywords: Private investment; Economic growth;

    This paper has been announced in the following NEP Reports:

    References

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    1. Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Cabalero, R.J., 1997. "Aggregaete Investment," Working papers 97-20, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Robertson, Peter E, 2000. "Diminished Returns? Growth and Investment in East Asia," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 343-53, December.
    4. Giorgio Calcagnini & Enrico Saltari, 2002. "Labour and financial market determinants of investiment decisions in Europe," Working Papers 56, University of Rome La Sapienza, Department of Public Economics.
    5. A. Senhadji Semlali & Charles Collyns, 2002. "Lending Booms, Real Estate Bubbles and The Asian Crisis," IMF Working Papers 02/20, International Monetary Fund.
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    7. Oshikoya, Temitope W, 1994. "Macroeconomic Determinants of Domestic Private Investment in Africa: An Empirical Analysis," Economic Development and Cultural Change, University of Chicago Press, vol. 42(3), pages 573-96, April.
    8. Dhaneshwar Ghura & Barry Goodwin, 2000. "Determinants of private investment: a cross-regional empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 32(14), pages 1819-1829.
    9. Ivar Kolstad & Espen Villanger, 2004. "Determinants of foreign direct investment in services," CMI Working Papers WP 2004: 2, CMI (Chr. Michelsen Institute), Bergen, Norway.
    10. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    11. Song, Haiyan & Liu, Zinan & Jiang, Ping, 2001. "Analysing the determinants of China's aggregate investment in the reform period," China Economic Review, Elsevier, vol. 12(2-3), pages 227-242.
    12. Benoît Mercereau, 2005. "FDI Flows to Asia: Did the Dragon Crowd Out the Tigers?," IMF Working Papers 05/189, International Monetary Fund.
    13. Nauro F. Campos & Jeffrey B. Nugent, 2003. "Aggregate Investment and Political Instability: An Econometric Investigation," Economica, London School of Economics and Political Science, vol. 70(279), pages 533-549, 08.
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    Cited by:
    1. James Ang, 2008. "Private Investment And Financial Sector Policies In Developing Countries," Development Research Unit Working Paper Series 07/08, Monash University, Department of Economics.

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