Abstract
Malaysia is a small open economy and is exposed to all sorts of external shocks, interruptions, disruptions or macroeconomic uncertainty. These shocks may cause many potential misfortunes such as periodic economic recessions, fluctuation in the business cycles, unpredictable oil price hikes, financial crises, technological change, crime and natural disasters. The objective of this paper is to analyse the effect of economic resilience on private investment in selected Malaysian economic sectors. The analysis uses secondary panel data that are gathered from various official reports through library research. In the analysis, private investment in selected Malaysian economic sectors represents the dependent variable. Meanwhile, the independent variables are represented by gross domestic product (GDP), interest rates, macroeconomic stability and microeconomic market efficiency. The indicator used to represent macroeconomic stability is fiscal deficit to GDP ratio. Microeconomic market efficiency is represented by government size (government expenditure), regulatory efficiency (business freedom), and market openness (investment freedom). The empirical analysis has been performed using generalized methods of moments (GMM). The results show that GDP, interest rates, and investment freedom are statistically significant at the five percent level of significance. DOI: 10.5901/mjss.2015.v6n6p374
Highlights
Malaysia is a small open economy and is exposed to all sorts of exogenous shocks, interruptions, disruptions or macroeconomic uncertainty
To examine the role played by economic resilience on private investment, our model has been developed based on the famous firm investment decision models such as the accelerator model, Jorgenson’s neoclassical model, and the modified neoclassical model (i.e. Clark, 1979; Bernanke, Bohn & Reiss, 1988; Jorgenson et al, 1970a, b)
The results show that all the coefficients of gross domestic product (GDP), GINV, INVF and BF are statistically significant at the five percent level of significance
Summary
Malaysia is a small open economy and is exposed to all sorts of exogenous shocks, interruptions, disruptions or macroeconomic uncertainty. Exogenous shocks, which mainly consist of natural shocks and external shocks, may cause many potential misfortunes and instability on growth such as periodic economic recessions, fluctuation in the business cycles, unpredictable oil price hikes, financial crises, technological change, crime and natural disasters. Traditional macroeconomic theories view that private investment is influenced by many conventional determinants or financial factors namely interest rates, marginal efficiency of capital, and price of capital. Our survey of the literature shows that previous studies have not provided sufficient evidence on the relationship between private investment and economic resilience. Private investment level dramatically declined followed by short-run fluctuations after 1999
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