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Malaysia's outward FDI: The effects of market size and government policy

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  • Goh, Soo Khoon
  • Wong, Koi Nyen

Abstract

This paper extends the empirical literature of Malaysia's outward FDI (OFDI) by considering the impact of foreign market size and home international reserves using multivariate cointegration and error-correction modeling techniques. The empirical results reveal that there is a positive long-run relationship between Malaysia's OFDI and its key determinants, viz. foreign market size, real effective exchange rate, international reserves and trade openness. The main findings suggest that apart from the market-seeking incentive and the adoption of outward-oriented policies, the Malaysian government could also encourage OFDI by implementing liberal policy on capital outflows. On the basis of these findings, we draw some policy implications for the country's economic development and the internationalization of Malaysian firms in the era of globalization.

Suggested Citation

  • Goh, Soo Khoon & Wong, Koi Nyen, 2011. "Malaysia's outward FDI: The effects of market size and government policy," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 497-510, May.
  • Handle: RePEc:eee:jpolmo:v:33:y:2011:i:3:p:497-510
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    Cited by:

    1. Estrin, Saul & Meyer, Klaus E. & Nielsen, Bo B. & Nielsen, Sabina, 2016. "Home country institutions and the internationalization of state owned enterprises: a cross-country analysis," LSE Research Online Documents on Economics 64605, London School of Economics and Political Science, LSE Library.
    2. Koi Nyen Wong & Soo Khoon Goh, 2013. "Outward FDI, merchandise and services trade: evidence from Singapore," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(2), pages 276-291, April.
    3. Sun, Sunny Li & Peng, Mike W. & Lee, Ruby P. & Tan, Weiqiang, 2015. "Institutional open access at home and outward internationalization," Journal of World Business, Elsevier, vol. 50(1), pages 234-246.
    4. Soo Khoon Goh & Koi Nyen Wong, 2014. "Could Inward FDI Offset the Substitution Effect of Outward FDI on Domestic Investment? Evidence from Malaysia," Prague Economic Papers, University of Economics, Prague, vol. 2014(4), pages 413-425.
    5. Goh, Soo Khoon & Wong, Koi Nyen & Tham, Siew Yean, 2013. "Trade linkages of inward and outward FDI: Evidence from Malaysia," Economic Modelling, Elsevier, vol. 35(C), pages 224-230.
    6. Stoian, Carmen, 2013. "Extending Dunning's Investment Development Path: The role of home country institutional determinants in explaining outward foreign direct investment," International Business Review, Elsevier, vol. 22(3), pages 615-637.
    7. Chowdhury, Mamta B, 2011. "India’s Outward Foreign Direct Investment: Closed Doors to Open Souk," MPRA Paper 32828, University Library of Munich, Germany.
    8. Estrin, Saul & Meyer, Klaus E. & Nielsen, Bo B. & Nielsen, Sabina, 2016. "Home country institutions and the internationalization of state owned enterprises: A cross-country analysis," Journal of World Business, Elsevier, vol. 51(2), pages 294-307.
    9. Goh, Soo Khoon & Wong, Koi Nyen & Tham, Siew Yean, 2012. "Does Outward FDI Matter in International Trade? Evidence from Malaysia," MPRA Paper 39715, University Library of Munich, Germany.
    10. Wattanadumrong, Bhagaporn & Collins, Alan & Snell, Martin C., 2014. "Taking the Thai trail: Attracting FDI via macro-level policy," Journal of Policy Modeling, Elsevier, vol. 36(6), pages 1135-1151.

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    Keywords

    Outward FDI Malaysia;

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