A Study on the Dynamic Relationship between Inflation, Foreign Direct Investment, International Trade and Economic Growth in Malaysia

Abstract

The main purpose of this study is to study the relationship between economic growth, inflation, international trade and foreign direct investment.Purpose - The main purpose of this study is to study the relationship between economic growth, inflation, international trade and foreign direct investment.Design/Methodology/Approach - There were two (2) test carried out from this paper. The first test is Regression model use for all the variables included in this study. Whereas the second test is Multiple Regression model use only for the variables that is significant.Findings - Empirical result show that inflation have no relationship towards economic growth. An increase in inflation will not be affected with the economic growth due to the rising of general price level of goods. Moreover, Balance of Trade (BOT) have a negative relationship with economic growth while FDI have a positive relationship with economic growth.Research Limitations/Implications - Further research should investigate the impact of other variables that can give impact towards economic growth. Other variables that may also affect the economic growth include demographic, political risk or freedom and technological factors. Size of population may also cause the difference of economic growth level of one country to the other country.Practical Implications - The findings are helpful to financial managers, investors and traders dealing with the Malaysian economy.Originality/Value - The contribution of this paper is to provide evidence on the empirical linkages between economic factors and its effect towards economic growth in Malaysia.