The Indirect Effect of Coronavirus Disease (COVID-19) Pandemic on Economic Growth in Malaysia: Evidence from The ARDL Approach

Abstract

This study explores the indirect effect of corona virus (COVID-19) infections on economic growth in Malaysia using the industrial production index (IPI) as a proxy. Since the prevalence of COVID-19 infection, Malaysia’s economy has experienced swindles in its growth, just like other countries economy, and the struggle for survival among countries in which Malaysia’s economy is not exceptional becomes the current issue. This study incorporates the COVID-19 indirect impacts on economic growth which is conditional to COVID-19 deaths. It also explains a way forward for recuperation among economic sectors for faster economic growth in Malaysia. This paper uses the Auto Regressive Distributed Lag (ARDL) model to explore the indirect effect of COVID-19 infections on economic growth conditional on COVID-19 deaths in Malaysia. As an empirical study, the data used were monthly secondary data and were obtained from reliable sources. The findings from the results of the ARDL model, considering the unconditional model show that COVID-19 infections have a negative relationship with economic growth in Malaysia. The conditional models used to find the indirect impact of COVID-19 on economic growth considering the interaction of the variables at mean, maximum and minimum, prove that COVID-19 has an indirect negative effect on economic growth when COVID-19 deaths are at their mean and maximum. The marginal effect result shows a negative relationship and significance at 1%, indicating that increase in COVID-19 infections leads to decrease in economic growth in Malaysia conditional to COVID-19 deaths