Since the existing literature on the empirical knowledge about the causality patterns
between OFDI from Malaysia and its economic growth is limited3, this paper aims to to
explore empirically whether OFDI could be the new sources of growth for the country
and in turn, to examine whether higher home economic growth would encourage crossborder
direct investment by Malaysian multinational firms so that they can improve their
international competitiveness. Such an empirical study has implications for policy
formulation and analysis for Malaysia’s OFDI especially in the current wave of
globalization. The structure of this paper is as follows. Section II provides a description
of the data as well as their time series properties based on unit root tests, which are a
prerequisite for Granger causality analysis (Granger 1969, 1988). Section III presents and
discusses the empirical results. The main conclusions and policy discussions are
summarized in Section IV.