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Determinants Of Private Investment In Malaysia: What Causes The Postcrisis Slumps?

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  • JAMES B. ANG

Abstract

"This paper examines the determinants of private investment in Malaysia, with an emphasis on the postcrisis investment slumps. A static private investment function is derived from the neoclassical framework, with appropriate modifications to account for the structural features observed in the country. To introduce dynamics into the model, we adopt a cost minimization problem, which assumes firms optimize investment levels with respect to a quadratic loss function. The results suggest that the availability of financial resources in the economy has a significant positive impact on private investment. Macroeconomic uncertainty exerts a negative influence on the investment climate in the private sector. Both foreign direct investment and public investment are found to have a complementary effect on private investment. Consistent with the prediction of the neoclassical model, a higher level of aggregate output raises private investment, whereas the user cost of capital has the opposite impact." ("JEL" O"16", O"53") Copyright (c) 2009 Western Economic Association International.

Suggested Citation

  • James B. Ang, 2010. "Determinants Of Private Investment In Malaysia: What Causes The Postcrisis Slumps?," Contemporary Economic Policy, Western Economic Association International, vol. 28(3), pages 378-391, July.
  • Handle: RePEc:bla:coecpo:v:28:y:2010:i:3:p:378-391
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1465-7287.2009.00155.x
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    1. DONALD S. Kenkel, 1993. "Prohibition Versus Taxation: Reconsidering The Legal Drinking Age," Contemporary Economic Policy, Western Economic Association International, vol. 11(3), pages 48-57, July.
    2. Coate, Douglas & Grossman, Michael, 1988. "Effects of Alcoholic Beverage Prices and Legal Drinking Ages on Youth Alcohol Use," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 145-171, April.
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    Cited by:

    1. Hashmat Khan & Santosh Upadhayaya, 2017. "Does Business Con?dence Matter for Investment?," Carleton Economic Papers 17-13, Carleton University, Department of Economics.
    2. Anis Omri & Amel Sassi-Tmar, 2015. "Linking FDI Inflows to Economic Growth in North African Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), pages 90-104.
    3. repec:ipg:wpaper:2014-557 is not listed on IDEAS
    4. Tang, Chor Foon & Tan, Bee Wah & Ozturk, Ilhan, 2016. "Energy consumption and economic growth in Vietnam," Renewable and Sustainable Energy Reviews, Elsevier, pages 1506-1514.
    5. Ibrahim, Mansor H. & Ahmed, Huson Joher Ali, 2014. "Permanent and transitory oil volatility and aggregate investment in Malaysia," Energy Policy, Elsevier, pages 552-563.
    6. Omri, Anis & kahouli, Bassem, 2014. "The nexus among foreign investment, domestic capital and economic growth: Empirical evidence from the MENA region," Research in Economics, Elsevier, pages 257-263.
    7. repec:ipg:wpaper:2014-558 is not listed on IDEAS
    8. Tan, Bee Wah & Tang, Chor Foon, 2011. "The dynamic relationship between private domestic investment, the user cost of capital, and economic growth in Malaysia," MPRA Paper 27964, University Library of Munich, Germany.
    9. Anis Omri & Amel Sassi-Tmar, 2015. "Linking FDI Inflows to Economic Growth in North African Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), pages 90-104.
    10. Omri, Anis & Kahouli, Bassem, 2013. "The nexus between foreign investment, domestic capital and economic growth: Empirical evidence from the MENA region," MPRA Paper 82505, University Library of Munich, Germany, revised Oct 2013.
    11. Anwar, Sajid & Sun, Sizhong, 2011. "Financial development, foreign investment and economic growth in Malaysia," Journal of Asian Economics, Elsevier, pages 335-342.

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