Institutions and foreign direct investment (FDI) in Malaysia: empirical evidence using ARDL model
Since 1990’s, institution factors have been regarded as playing important roles in stimulating foreign direct investments (FDI). However, empirical studies on their importance in affecting FDI are still lacking especially for small open economies. This paper attempts to investigate the role of institutions upon the inflow of foreign direct investment (FDI) in a small open economy of Malaysia. Using bounds testing approach (ARDL model), the empirical findings reveal that there exists a long run relationship among FDI and the institution variables. Specifically, several institution variables namely government stability, bureaucracy, and corruption are found to play prominent roles in influencing the inflow of FDI. Thus, in attracting foreign investors, implementing FDI-friendly policies by providing and maintaining the quality of domestic institutions would be beneficial to Malaysian economic growth.
|Date of creation:||29 Jun 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Du, Julan & Lu, Yi & Tao, Zhigang, 2008. "Economic institutions and FDI location choice: Evidence from US multinationals in China," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 412-429, September.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Verdier, Genevieve, 2008.
"What drives long-term capital flows A theoretical and empirical investigation,"
Journal of International Economics,
Elsevier, vol. 74(1), pages 120-142, January.
- Genevieve Verdier, 2003. "What Drives Long-term Capital Flows? A Theoretical and Empirical Investigation," Macroeconomics 0310011, EconWPA, revised 14 Jul 2005.
- Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
- Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
- Ang, James B., 2008. "Determinants of foreign direct investment in Malaysia," Journal of Policy Modeling, Elsevier, vol. 30(1), pages 185-189.
- Hefeker, Carsten & Busse, Matthias, 2005.
"Political Risk, Institutions and Foreign Direct Investment,"
HWWA Discussion Papers
315, Hamburg Institute of International Economics (HWWA).
- Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
- Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2007.
"Institutional Determinants of Foreign Direct Investment,"
The World Economy,
Wiley Blackwell, vol. 30(5), pages 764-782, 05.
- Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2005. "Institutional Determinants of Foreign Direct Investment," Working Papers 2005-05, CEPII research center.
- Papaioannou, Elias, 2009.
"What drives international financial flows? Politics, institutions and other determinants,"
Journal of Development Economics,
Elsevier, vol. 88(2), pages 269-281, March.
- Papaioannou, Elias, 2008. "What Drives International Financial Flows? Politics, Institutions and Other Determinants," CEPR Discussion Papers 7010, C.E.P.R. Discussion Papers.
- Aymo Brunetti & Beatrice Weder, 1998. "Investment and institutional uncertainty: A comparative study of different uncertainty measures," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(3), pages 513-533, September.
- James Ang, 2009. "Financial development and the FDI-growth nexus: the Malaysian experience," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1595-1601.
- Shang-Jin Wei, 1997. "Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills," NBER Working Papers 6255, National Bureau of Economic Research, Inc.
- James G. MacKinnon, 1992.
"Approximate Asymptotic Distribution Functions for Unit Roots and Cointegration Tests,"
861, Queen's University, Department of Economics.
- MacKinnon, James G, 1994. "Approximate Asymptotic Distribution Functions for Unit-Root and Cointegration Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 167-76, April.
- Lee, Jeong-Yeon & Mansfield, Edwin, 1996. "Intellectual Property Protection and U.S. Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 181-86, May.
- Holger Schmieding, 1993. "From plan to market: On the nature of the transformation crisis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 129(2), pages 216-253, June.
- Christian Daude & Ernesto Stein, 2007. "The Quality Of Institutions And Foreign Direct Investment," Economics and Politics, Wiley Blackwell, vol. 19(3), pages 317-344, November.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:31899. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.