Foreign portfolio investment and economic growth in Malaysia

Duasa, Jarita and Kassim, Salina (2009) Foreign portfolio investment and economic growth in Malaysia. The Pakistan Development Review, 48 (2). ISSN 0030-9729

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Abstract

This study examines the relationship between foreign portfolio investment (FPI) and Malaysia’s economic performance. In particular, the study analyses the relationship between FPI and real gross domestic product (GDP) using the widely adopted Granger causality test and the more recent Toda and Yamamoto’s (1995) non-causality test to establish the direction of causation between the two variables. Similar method is also applied on the relationship between volatility of FPI and real GDP. Additionally, the study uses an innovation accounting by simulating variance decompositions and impulse response functions for further inferences. Using quarterly data covering the period from 1991 to 2006, the study finds evidence that economic growth causes changes in the FPI and its volatility and not vice versa.. The findings suggest that economic performance is the major pull factor in attracting FPI into the country. Thus, it must be ensured that the Malaysian economy remains on a healthy and sustainable growth path so as to maintain investor confidence in the economy.

Item Type:	Article (Book Review)
Additional Information:	3479/11819
Subjects:	H Social Sciences > HC Economic History and Conditions > HC94 By region or country H Social Sciences > HG Finance > HG4501 Stocks, investment, speculation
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Economics and Management Sciences > Department of Economics
Depositing User:	Prof. Dr. Salina Kassim
Date Deposited:	04 Jan 2012 16:01
Last Modified:	13 Jun 2013 11:34
URI:	http://irep.iium.edu.my/id/eprint/11819

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