DYNAMIC RELATIONSHIPS BETWEEN SELECTED MACROECONOMIC VARIABLES AND MALAYSIA'S SECTORAL GROSS DOMESTIC PRODUCT: AN ARDL APPROACH

Abstract

Abstract: This study aims to investigate the dynamic relationship between macroeconomic variables gross fixed capital formation (GFCF), external debt (ED), export trade (EXT), remittances (REM), and labor force (LF) with sector GDP in Malaysia, which consists of the primary, secondary, and tertiary sectors. By using the ARDL (Auto-Regressive Distributed Lag) Model approach, the study's results show these variables’ short term and long-term effects of those variables on the economic growth of the sectors concerned. The results of the study show that gross fixed capital formation and labor force have a consistent positive effect on GDP in most sectors, emphasizing the role of infrastructure investment and workforce efficiency in driving growth. In contrast, external debt and remittances show mixed effects, reflecting the challenges of financial management and productive use of remittance resources. Export trade has a significant influence but varies by sector, where the primary sector is exposed to the risk of dependence on certain commodity exports, while the tertiary sector is more flexible and able to absorb the impact of the global market. This study contributes to the existing literature by providing empirical insights into how macroeconomic variables affect GDP growth by sector in Malaysia.