Eu Chye Tan

Money demand amid financial sector developments in Malaysia

Both long and short run real money demand functions of Malaysia with money variously defined as M0, M1 and M2 have been estimated using the Johansen cointegration technique and the general-to-specific approach respectively. The period under review is 1973Q1-1991Q4. While liberalization and innovation in the Malaysian financial system have not ruled out the existence of stable long run money demand relationships as attested to by the presence of cointegrating vectors, they have rendered short run relationships unstable. Hence, it may not be appropriate for one to conclude that monetary policy efficacies have been sacrosanct to the financial liberalization and innovation process on the basis of cointegrating relationships. This is especially true as monetary policy is essentially a short run stabilization policy aimed at ironing out undue macroeconomic fluctuations. This prompted us to re-estimate short run money demand functions over more recent periods in order to boost the policy relevance of the estimated parameters.

Tourism-Led Growth Hypothesis in Malaysia: Evidence Based Upon Regime Shift Cointegration and Time-Varying Granger Causality Techniques

This article examines the tourism-led growth (TLG) hypothesis in Malaysia based upon quarterly data from 1991:Q1 to 2014:Q1. The Johansen–Juselius cointegration and the regime shift cointegration tests consistently show evidence of cointegration. In addition, we find evidence of unidirectional causality from tourism to economic growth in Malaysia. Furthermore, the rolling Granger causality test confirms that the TLG hypothesis is generally valid and stable in Malaysia. Therefore, tourism is an effective long-term engine of growth. Policies to promote tourism would effectively invigorate Malaysias long-term economic growth and development in Malaysia.

The determinants of inbound tourism demand in Malaysia: another visit with non-stationary panel data approach

Abstract The purpose of this study is to estimate an inbound tourism demand model for Malaysia by incorporating new control variables – environmental pollution and crime rate. We found that tourism demand is sensitive to income, price of tourism in Malaysia, price of alternative tourism destinations, pollution, and to the crime rate in Malaysia. We also found that the September 2001 terrorist attack incident and the health epidemic diseases, such as the severe acute respiratory syndrome and avian flu, had a negative impact on tourism demand in Malaysia. Thus, apart from economic factors, tourists’ decisions of where to go are also dependent on environmental quality, security, and health factors.

The Relative Contributions Of Domestic And Foreign Direct Investments And Exports To Malaysia'S Economic Growth

The objective of this study is to assess the roles of domestic direct investment, foreign direct investment and exports as catalysts of Malaysias economic growth using cointegration and Granger causality test techniques. To address the dynamics in the growth relationships, the study also performs time-varying regression and variance decomposition analyses. It covers the quarterly sample period from 1991:Q1 to 2010:Q2. The econometric results suggest that all the three variables have a positive impact on economic growth and thus are catalytic to economic growth. However, the growth effect of domestic direct investment is more stable than that of the other two growth determinants. Contrary to earlier empirical studies, the variance decomposition analysis herein reveals that domestic direct investment is the most important determinant of growth in the long-run (L-R) compared to exports and foreign direct investment.

Tourism-Led Growth Hypothesis: A New Global Evidence:

The primary aim of this study is to determine whether the tourism-led growth hypothesis is globally valid by accounting for countries’ income levels and their institutional qualities, against a panel dataset of 167 countries. The institutional qualities referred to are political stability and corruption control. We employ the dynamic panel generalized method of moments (GMM) approach to examine the relationship. It can be inferred from the exercise that tourism positively contributes to economic growth but the effect varies across countries at different levels of income and institutional qualities. Therefore, the effect of tourism on economic growth is contingent on levels of income and institutional qualities of the host tourism countries. Policy initiatives that aim to promote and strengthen institutional qualities should be undertaken for a country to enjoy the beneficial impact of tourism on economic growth and development.

MALAYSIA'S ECONOMIC GROWTH AND DEVELOPMENT: CHALLENGES AND THE WAY FORWARD

The paper reviews the economic growth and development experience of Malaysia since her early independence years against the major economic policy initiatives that she has undertaken over the years. It then tries to link those policy initiatives to the various economic growth theories. Subsequently, it dwells upon the various challenges faced by Malaysia to join the ranks of high income nations.

The Extent of Growth Dependence of Selected East Asian Economies on the USA

Abstract This paper assesses the extent of economic growth dependence of a number of East Asian countries on the USA based upon the quarterly data series spanning from the early 1990s. Generally, the empirical results suggest weak links of these economies to the US contrary to a-priori expectations. Only the GDP of Taiwan has a long-run relationship with the USA. Though Granger causal links from the USA to Japan, Malaysia, the Philippines and Taiwan exist, they are projected as weak by the impulse response functions. Co-integration and short-run causal links with the USA are ruled out in the case of China, Hong Kong, South Korea, Singapore and Thailand. Contemporaneous correlations of output growth shocks merely exist between the USA on one hand and Indonesia and Taiwan on the other. Hence, all this would suggest that these East Asian economies are generally in a position to grow quite independently of the USA, barring a global economic crisis. Nevertheless, they should strive for greater resilience by raising domestic consumption so that they need not always count on countercyclical macroeconomic policy measures to provide a buffer against external shocks.

External Trade and Economic Growth: The Malaysian Experience

Conventional wisdom suggests that exports linked with the expansion of the Malaysian manufacturing sector have brought about impressive rates of economic growth (and hence economic development) for Malaysia. The notion that export expansion could serve as an engine of growth in both developed and developing economies has been explored by economists since the late 1950s. Kindleberger (1962), Beckerman (1962), Lamfalussy (1963) and Chen (1977) have attempted to provide some theoretical links between an expansion of exports and economic growth. Kindleberger argues that an export expansion could promote investment, and cost-reducing innovations and economies of scale in production. Beckerman hypothesizes that, faced with the prospect of an export expansion, entrepreneurs will be motivated to invest more, resulting in greater output and productivity. In stressing the importance of the balance-of-payments position of a country, Lamfalussy maintains that a surplus external payments position arising from increased exports could spur the government to adopt expansionary policies that could encourage domestic investment. Chen (1977) contends that a surge in exports could aid in the financing of imports of capital goods that augments capital formation or accumulation.

Re-visiting the Savings-Led Growth Hypothesis and Its Stability in East Asian Economies

ABSTRACT The causal relationships between savings and economic growth have been given special attention because it has significant implication on policy-making. Nevertheless, the direction of causality remains unclear as previous studies failed to provide persuasive evidence to support the savings-led growth hypothesis. Therefore, the primary aim of this study is to empirically re-investigate the savings–growth nexus in selected East Asian economies. It covers the quarterly sample period from 1970:Q1 to 2011:Q4. Our empirical results reveal that savings, economic growth and some other variables are cointegrated in these economies. Additionally, the causality results exhibit that the causal effect from savings to economic growth is stable over the period of analysis. Therefore, the probability of success in boosting economic growth through any policy action to induce greater savings is the greatest in the case of East Asian economies.

Does the Source of Foreign Direct Investment Matter to Economic Growth in Malaysia

Abstract Foreign direct investment (FDI) is often viewed as a potential contributor to a country’s economic growth and development. However, the extent of the contribution may depend upon the source of such investment inflows. This paper assesses the contribution of inward FDI to Malaysia’s economic growth using investment data disaggregated by source over the period, 2008:Q1–2016:Q3. Due to the mixed orders of integration of the series involved, the autoregressive distributed lag (ARDL) framework is employed to conduct the assessment. The econometric results indicate that the source of the FDI does matter greatly when considering the extent of its spin-off for the local economy. Specifically, FDI flows from North America and Southeast Asia contribute more significantly to Malaysia’s economic growth than FDI flows from Central and South America, Northeast Asia and Oceania.