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The Role of Macroeconomic Fundamentals in Malaysian Post Recession Growth

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  • Lee, Chin

Abstract

This study aims to find out the role of macroeconomic fundamentals in Malaysian post recession growth. The selected macroeconomic variables are exports, imports, price level, money supply, interest rate, exchange rate and government expenditure. The technique of cointegration was employed to assess the long run equilibrium relationships among the variables. Then, this study performs the Granger causality tests based on VECM to establish the short run causality among the variables. The long-run cointegrating relationship shown that an increase in exports, government expenditure or depreciation of exchange rate will promote long-term economic growth while increase in inflation, interest rate and imports will tamper the Malaysian economic growth. The results of short-run Granger-causality indicated that price level and government spending Granger-caused economic growth in the short-run. In conclusion, based on the results of long-run and short run analysis, the fiscal policy is probably the most appropriate tool in promoting economic growth in Malaysia during the post recession period.

Suggested Citation

  • Lee, Chin, 2013. "The Role of Macroeconomic Fundamentals in Malaysian Post Recession Growth," MPRA Paper 44808, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:44808
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    More about this item

    Keywords

    Malaysia post recession growth;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F1 - International Economics - - Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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