erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Economic Fluctuations and Growth in Malaysia

Ming-Yu Cheng (Multimedia University, Malaysia)

Abstract  

This paper aimed to investigate the relationship between fluctuation of major macroeconomics variables on the mean value of real Gross Domestic Product (GDP) in Malaysia since 1975 to 1999. The purpose is to examine how fluctuations in money supply, budget deficits and capital formation affects economic growth. The analysis adopts the time series approach of multivariate cointegration, Vector Error-Correction Model (VECM), impulse response functions and variance decompositions. Empirically, the results show that fluctuations in policy instruments, namely money supply and budget deficits significantly affect real GDP. However, this is not the case for capital formation. In conclusion, the results support the intervention argument where government policies play a fundamental role in revitalising economic growth during crises.

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