7. Conclusion
The paper has tested the direction of causality between FDI and growth in Malaysia .
Our empirical findings based on the Toda-Yamamoto causality test seem to suggest that
there is not a strong evidence of a bi-directional causality between GDP and FDI. Based
on these results the assumption that FDI case growth, vice versa, raised some doubts.
Also according to bounds tests there is not long-run relationship between FDI and GDP
in Malaysia.
Therefore other Increased attention needs also to be given to the overall role of growth
(and the quality of growth) as a crucial determinant of FDI along with the quality of
human capital, TFP (total factor of productivity) infrastructure, and we think the role of
FDI on growth in Malaysia should be in indirect relationship between those two
variables, such as technology transfer and productivity because In the case of
technologies, FDI is expected to be a potential source of productivity gains via spillovers
to domestic firms. Also the causality between FDI and GDP is not matter. Most
importantly, the performance of one variable does contribute to stability of another
variable. (We recommend this topic for future studies about FDI and economic growth in
Malaysia).
There are a range of possible factors that ensure that FDI promotes or hinders economic
growth .The factors are likely to differ between countries and between types of FDI and
sectors of destination. For example, the effects of FDI manufacturing might differ from
those in extractive sectors which again might differ from FDI that is result of
privatization of state-owned enterprise
7. ConclusionThe paper has tested the direction of causality between FDI and growth in Malaysia .Our empirical findings based on the Toda-Yamamoto causality test seem to suggest thatthere is not a strong evidence of a bi-directional causality between GDP and FDI. Basedon these results the assumption that FDI case growth, vice versa, raised some doubts.Also according to bounds tests there is not long-run relationship between FDI and GDPin Malaysia.Therefore other Increased attention needs also to be given to the overall role of growth(and the quality of growth) as a crucial determinant of FDI along with the quality ofhuman capital, TFP (total factor of productivity) infrastructure, and we think the role ofFDI on growth in Malaysia should be in indirect relationship between those twovariables, such as technology transfer and productivity because In the case oftechnologies, FDI is expected to be a potential source of productivity gains via spilloversto domestic firms. Also the causality between FDI and GDP is not matter. Mostimportantly, the performance of one variable does contribute to stability of anothervariable. (We recommend this topic for future studies about FDI and economic growth inMalaysia).There are a range of possible factors that ensure that FDI promotes or hinders economicgrowth .The factors are likely to differ between countries and between types of FDI andsectors of destination. For example, the effects of FDI manufacturing might differ fromthose in extractive sectors which again might differ from FDI that is result ofprivatization of state-owned enterprise
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