An Examination of the Government Spending and Economic Growth Nexus for Malaysia Using the Leveraged Bootstrap Simulation Approach

Abstract

The main objective of this study is to re-examine the government spending-growth nexus for Malaysia from the perspective of disaggregated government spending. The yearly data from 1960 to 2007 is used in this study. This study applied the bounds testing for co-integration and the leveraged bootstrap simulation approaches to examine the relationship between three different categories of government spending and national income in Malaysia. It is found that government spending on education and defence are co-integrated with national income. Nevertheless, there is no evidence of co-integrating relation between government spending on health and national income. The MWALD causality test shows strong evidence of unidirectional causal relationship running from national income to the three major government spending in Malaysia. However, bilateral causality evident exists only between government spending on health and national income.     

Determinants of Malaysian Trade Balance: An ARDL Bound Testing Approach

Abstract

This paper examines the short- and long-run relationships between trade balance, real exchange rates, income and money supply in the case of Malaysia. The inclusion of income and money variables in the study is purposely to examine the monetary and absorption approaches to the balance of payments beside the conventional approach of elasticity, using exchange rates. Using the bound testing approach to cointegration and error correction models, developed within an autoregressive distributed lag (ARDL) framework, we investigate whether a long-run equilibrium relationship exists between trade balance and the determinants. Additionally, we adopt an innovation accounting by simulating variance decompositions (VDC) and impulse response functions (IRF) for further inferences. Using this approach, we find evidence of a long-run relationship between trade balance and income and money supply variables but not between trade balance and real exchange rate. The findings also suggest that Marshall–Lerner condition does not hold in the long-run for Malaysia and for policy wise the Malaysian trade balance/balance of payments should be viewed from absorption and monetary approaches.     

Currency Substitution and the Stability of the Demand for Money in East Asia

Abstract

This paper models and tests the stability of the demand for money in five East Asian countries—Indonesia, Malaysia, Philippines, Singapore, and Thailand—in the context of an open economy. The Johansen multivariate cointegration vector error correction analysis against quarterly data covering the period 1985:1–2001:4 was used. It was found that a stationary long run cointegrating relationship exists between broad money, real income, domestic interest rates, foreign interest rates corrected for exchange rate depreciation, and the expected rate of depreciation of the exchange rate. The results show that US Treasury bills rates and the foreign exchange rate vis-à-vis the US dollar play a significant role in the East Asian countries money demand relationship. This suggests that currency substitution vis-à-vis the US dollar may be an important consideration in the design and implementation of monetary policy in the East Asian countries. Furthermore, the results show that the Asian currency crises impacted the money demand functions negatively in these countries. CUSUM and CUSUMSQ stability tests show no evidence of parameter instability of the money demand functions in three of the five countries throughout the period under investigation.     

WAGNER'S LAW: AN ECONOMETRIC TEST FOR SOUTH AFRICA, 1960‐2006

The main objective for this paper is to test Wagner's law by analysing the causal relationships between real government expenditure and real income for South Africa for the period 1960‐2006. The paper tests the long‐run relationship between the two variables using the autoregressive distributive lag approach to cointegration suggested by Pesaran et al. We use the Granger non‐causality test procedure developed by Toda and Yamamoto, which uses a vector autoregression model to test for the causal link between the two. Evidence of cointegration is sufficient to establish a long‐run relationship between government expenditure and income. However, support for Wagner's law would require unidirectional causality from income to government expenditure. Therefore, cointegration should be seen as a necessary condition for Wagner's law, but not sufficient. This research does find a long‐run relationship between real per capita government expenditure and real per capita income. Results for the short‐run causality find bidirectional causality. On the basis of empirical results in this paper, one may tentatively conclude that Wagner's law finds no support in South Africa.     

The Determinants of Foreign Direct Investment in Malaysia: A Revisit

Abstract

The paper re-examines the determinants of foreign direct investment (FDI) in Malaysia, for the period 1970–2006. The cointegration results show that market size of both Malaysia and China have major, and a statistically significant impact, on FDI inflow to Malaysia. The results seem to support the argument that foreign investors tend to be more attracted to the country with a higher growth rate of gross domestic product (GDP) because it indicates a larger potential demand for their products. In addition, the results also demonstrate that openness level of the country has a positive and statistically significant effect on FDI inflow, which supports the hypothesis that FDI can be attracted to a country with more liberalized economic reforms. Finally, the results show that literacy rate (human capital development) has significant positive effect on FDI inflow. The finding suggests the need for labor force expansion and education policy to raise the stock of human capital in the country. Using Granger causality test, we also find that there exist unidirectional causality from real GDP of both Malaysia and China, degree of openness and literacy rate to FDI inflow.     

Macroeconomic Variables and Stock Prices in Malaysia: An Empirical Analysis

The article investigates the dynamic interactions between seven macroeconomic variables and the stock prices for an emerging market, Malaysia, using cointegration and Granger causality tests. The results strongly suggest informational inefficiency in the Malaysian market. The bivariate analysis suggests cointegration between the stock prices and three macroeconomic variables – consumer prices, credit aggregates and official reserves. From bivariate error-correction models, we note the reactions of the stock prices to deviations from the long run equilibrium. These results are further strengthened when we extend the analysis to multivariate settings. We also note some evidence that the stock prices are Granger-caused by changes in the official reserves and exchange rates in the short run.     

中国能源消费与GDP因果关系的实证研究——基于结构变化、技术进步视角

文章运用协整理论和Granger因果关系检验方法,对1953-2006年中国能源消费总量、经济增长、产业结构、技术进步间的协整关系和因果关系进行了实证研究。研究发现：中国能源消费总量、经济增长、产业结构、技术进步之间存在着长期的均衡关系,Chow检验结果表明1978年的因果关系没有发生变化。向量误差修正模型（VECM）的Granger因果关系检验结果表明：在长期内,存在从能源消费到经济增长的双向因果关系;而在短期内,只存在GDP到能源消费的单向因果关系。     

Export-output causality: The Irish case 1953–93

Despite proposed theoretical relationships, recent empirical research has found no conclusive support for a causal relationship between exports and output. Using the methodological approach based on the statistical theory of cointegration and Granger causality tests, the causal relationship between exports and output is examined here using Irish data. The Johansen technique is used and error-correction modeling is incorporated into the Granger causality tests. Results suggest that exports and GDP are cointegrated. Augmented Granger causality tests indicate support for the export-led growth hypothesis since there is evidence of short-run and long-run causality from exports to output.An earlier version of this paper was presented at the Forty-First International Atlantic Economic Conference in Paris, France, March 13–18, 1996. The author would like to thank Liam Gallagher and Van Newby for helpful comments.     

Causal Relationship between Domestic Savings and Economic Growth: Evidence from Seven African Countries

This paper utilizes cointegration and the vector error‐correction model (VECM) to explore the causal relationship between economic growth and growth rate of domestic savings for Congo, Côte d’Ivoire, Ghana, Kenya, South Africa, and Zambia. Specifically, three analyses were undertaken. First, the time series properties of economic growth and domestic savings were ascertained with the help of the augmented Dickey–Fuller unit root procedure. Second, the long‐run relationship between economic growth and growth rate of domestic savings was examined in the context of the Johansen and Juselius (1990) framework. Finally, a Granger‐causality test was undertaken to determine the direction of causality between economic growth and growth rate of domestic savings. The results indicate one order of integration [I(1)] for each of the series. The results of the cointegration tests suggest that there is a long‐run relationship between economic growth and growth rate of savings. The results from the Granger‐causality tests indicate that contrary to the conventional wisdom, economic growth prima facie causes growth rate of domestic savings for most of the countries under consideration.     

The monetary exchange rate model in the long run: An empirical investigation

The Monetary Exchange Rate Model in the Long Run: An Empirical Investigation. — This paper uses the Johansen multivariate cointegration method to examine three variants of the monetary approach to the long-run exchange rate model: flexible price, forward-looking and sticky price monetary models. Evidence is provided for four bilateral sterling exchange rates. The sensitivity of the results to the measurement of monetary aggregates is also examined. The cointegration results provide dismal evidence for the flexible price and forward-looking models irrespective of the measurement of money. The findings are more mixed for the sticky price model, particularly when broad money is used.     

技术进步与我国出口贸易模式演进

文章应用我国1980-2006年相关数据,采用协整检验和Granger因果关系检验方法,对技术进步、资本积累、FDI与出口商品结构之间的关系进行了分析.结果表明,四者之间存在协整关系,技术进步与我国对外贸易模式之间存在着互为因果的双向联系.     

基于总生产函数法研究石油价格对我国GDP的动态影响

本文通过总生产函数法,将石油价格纳入宏观经济的影响因素之一,考察其对我国GDP等经济指标的影响。并构建自相关回归模型,通过参数估计、协整性检验和因果检验,定量地分析出石油价格与我国GDP等经济指标之间的长期均衡关系和短期的影响程度。     

Monetary Policy and Sectoral Bank Lending in Malaysia

Abstract

Unlike most studies on the effect of monetary policy on bank lending, this article intends to answer the question whether the tightening of monetary policy in Malaysia before and after the financial crisis in 1997 affected differently the commercial bank lending to various sectors of the economy. To achieve the objective, Vector Autoregressive Regression (VAR) method was used to generate impulse response function and variance decomposition to trace the impact of a shock in monetary policy on bank lending in Malaysia. The results show that a monetary policy tightening in Malaysia gives a negative impact on all the sectors. Analyzing sectoral responses to monetary shocks, evidence is found that some sectors are more affected than the others. The manufacturing, agricultural, and mining sector seems to decline more than the aggregate bank lending in response to interest rate shock.     

外国直接投资、外国证券投资与经济增长:以中国为

文章以中国1982-2005年的统计数据为例,通过建立格兰杰因果关系检验模型以及Johansen协整关系检验模型,对中国FDI、FPI和经济增长之间的短期关系和长期关系分别进行了实证研究,并在此基础上得出相关结论和建议.     

Strategic implications of the Soviet‐North Korean alliance

Abstract

Globalization is commonly defined as a strict economic path by most previous works, but it is really a fuzzy concept with unrestrained dimensions. While the ideological location of an incumbent political party is a powerful predictor of its policy position, the role of a political party in the globalization-growth nexus has never been fully empirically investigated. By applying Pedroni's panel cointegration technique instead of a time-series or traditional panel data approach, this paper aims to empirically re-examine the co-movement and the causal relationship among economic growth, the overall globalization index, and its three main dimensions—economic, social, as well as political integrations—by using panel data for 23 Organization for Economic Cooperation and Development (OECD) countries for 1970 to 2006. Certainly, the political party variable is taken into account as the advanced test is promoted, and we finally discover that all variables move together in the long run. Based on the results of the panel causality test, though the evidence of short-run causality is very weak, it does show long-run unidirectional causality running from the overall index of globalization, economic globalization, and social globalization to growth. Finally, the critical role of the political party is deeply discussed in relation with our results.     

Foreign Direct Investment and Services Trade: Evidence from Malaysia and Singapore

Abstract

Services trade is an important source of growth in Malaysia and Singapore. Both economies are export-oriented and actively court foreign direct investment (FDI) to advance their economic objectives of industrialization and economic development. This paper examines the causal linkages between inward FDI and the country's engagement in services trade in bi-variate and tri-variate VAR frameworks. The empirical findings for Singapore show evidence of bi-directional causality between inward FDI and the total trade volume in services (i.e. the absolute sum of payments and receipts) as well as between FDI and services imports (in the tri-variate specification). This may reflect her relative open foreign investment policy and free trade regime in services. For Malaysia, the evidence of causality is weaker and uni-directional, from inward FDI to services imports. These findings are consistent with the different stages of economic development and openness attained by the two sample countries, and they provide useful background for trade and foreign investment policies and development strategies.     

Deviation from Purchasing Power Parity: Evidence from Malaysia, 1973–1997

This paper presents an empirical test of Purchasing Power Parity (PPP) applied to the Malaysia ringgit for the period from 1973 (CPI) and 1984 (WPI) to 1997. Consistent with other research findings, it is detected that real exchange rate follows a random walk. Using multivariate cointegration methodology for the long-run relationship between real exchange rate and certain macro-economic variables, the study provides evidence supporting a long-run relationship between the real exchange rate and the current account balance and government spending, the last two variables have been not included in previous studies of this economy. The causality test between real exchange rate with the current account balance and government spending, however, does not receive support from the error-correction model. This suggests that both government spending and current account balance are not adequate to explain the changes in ringgit real exchange rate. The puzzle still remains unsolved.     

Export performance and economic growth causality: An empirical analysis

The cointegration and causal relationship between export growth and economic growth is investigated for the Nordic economies. On the basis of Johansen's technique and the augmented Granger causality tests, the evidence shows that these macroeconomic aggregates are causally related in the long run for each economy. Granger causality is unidirectional, running from economic growth to export growth in Denmark, and bidirectional in Finland, Norway, and Sweden. The established bidirectional causality suggests that the expansion of exports is an integral part of the economic growth process.     

Monetary Model of Exchange Rate for Thailand: Long-run Relationship and Monetary Restrictions

Abstract

This paper examines the long-run relationship between exchange rate and its determinants based on the flexible-price monetary model. The multivariate cointegration approach is adopted to attain our objective of this study. The empirical results provide evidence favoring the monetary approach to exchange rate for a small and open emerging economy, namely Thailand. In addition, the validity of the underlying assumptions of the monetary approach to the determination of exchange rate is established. The findings suggest that exchange rate players may effectively monitor and forecast the exchange rate movement via the money supplies, incomes, and interest rates variables of both Thailand and Japan. Besides, one has to follow the economic development of Thailand's major trading partner, Japan, to understanding the movement of exchange rate for Thailand. Moreover, our findings add new insights to accompany previous studies that documented the important influence of the US in the emerging Asian economies.     

技术选择与经济增长的关系研究——以浙江省为例

首先综述国内外技术选择与经济增长关系研究的相关文献,然后利用1978-2010年的样本区间数据,在VAR模型的基础上,运用Johansen协整检验方法,发现浙江省的技术选择与经济增长之间存在长期稳定的均衡关系,改革开放之后浙江省进行了适宜的技术选择,快速促进了经济增长。本文随后又进行了Granger因果检验、脉冲响应函数和方差分解分析,得出短期内浙江省技术选择对经济增长的影响方向和程度的结论。