THE EFFECT OF SELECTED MACROECONOMIC FACTORS TOWARDS ECONOMIC GROWTH IN MALAYSIA

Abstract

Abstract: To achieve prolonged financial growth, economies must first experience steady expansion. Most countries strive for brisk, sustained expansion of their economy. Implementing the objective has been challenging due to several financial factors that affect how the economy develops. Numerous financial factors, such as inflation, foreign direct investment, the value of the currency, and the labour force, have an impact on the economic expansion of any nation. Malaysia's economic growth is mostly measured by GDP. The major goal of this study is to determine how Malaysia's gross domestic product is impacted by inflation, foreign direct investment and the female labour force. The research will employ a dynamic methodology and time series data with a quarterly frequency. In this study, the Johansen Juselius cointegration test will be used in conjunction with Vector Autoregression (VAR) and the Augmented Dickey Fuller (ADF) unit root test to investigate the long-term relationship between variables in the observation. In accordance with the study's conclusions, all of the time series variables included in it are of type I(1). In other words, it is stationary at the first difference level. Furthermore, the Akaike value (AIC) on the Vector Autoregression (VAR) test suggests that lag 9 is the ideal lag. The cointegration test establishes that at least one cointegration vector exists between several macroeconomic indicators and gross domestic product. This demonstrates that the variables are in a stable balance over time. The existence of this cointegration indicates that the correlation between macroeconomic factors and GDP is not 'spurious', and the equilibrium is sustained over the long run..