Abdul Karim, Zulkefly and Zaidi, Mohd Azlan Shah and Ismail, Mohd Adib and Abdul Karim, Bakri (2011): Institutions and foreign direct investment (FDI) in Malaysia: empirical evidence using ARDL model.
Download (221kB) | Preview
Since 1990’s, institution factors have been regarded as playing important roles in stimulating foreign direct investments (FDI). However, empirical studies on their importance in affecting FDI are still lacking especially for small open economies. This paper attempts to investigate the role of institutions upon the inflow of foreign direct investment (FDI) in a small open economy of Malaysia. Using bounds testing approach (ARDL model), the empirical findings reveal that there exists a long run relationship among FDI and the institution variables. Specifically, several institution variables namely government stability, bureaucracy, and corruption are found to play prominent roles in influencing the inflow of FDI. Thus, in attracting foreign investors, implementing FDI-friendly policies by providing and maintaining the quality of domestic institutions would be beneficial to Malaysian economic growth.
|Item Type:||MPRA Paper|
|Original Title:||Institutions and foreign direct investment (FDI) in Malaysia: empirical evidence using ARDL model|
|Keywords:||Institutions; Foreign Direct Investment (FDI); ARDL|
|Subjects:||E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
|Depositing User:||Zulkefly Abdul Karim|
|Date Deposited:||29. Jun 2011 03:11|
|Last Modified:||19. Feb 2013 18:37|
Ang, J.B. (2008). Determinants of foreign direct investment in Malaysia. Journal of Policy Modelling, 30, 185-189.
Ang, J.B. (2009). Financial development and the FDI-growth nexus: the Malaysian experience. Applied Economics, 41, 1595-1601.
Brunetti, A. and Weder, B. (1998). Investment and institutional uncertainty : a comparative study of difference uncertainty measures. Weltwirtschaftliches Archiv 134, 513-533.
Busse, M. and Hefeker, C. (2007). Political risk, institution and foreign direct investment. European Journal of Political Economy, 23, 397-415.
Daude, C. and Stein, E. (2007). The quality of institutions and foreign direct investment. Economics & Politics, vol. 19, 317-344.
Du, J., Lu, Y., and Toa, Z. (2008). Economic institutions and FDI location choice: Evidence from US multinational in China. Journal of Comparative Economics, 36, 412-429.
Herzer, D., Klasen, S. and Nowark-Lehmann, D. F. (2008). In the search of FDI-led growth in developing countries: The way forward. Economic Modelling 25(5), 793-810.
Kaufmann, D., A. Kraay, and P. Zoido-Lobaton. (1999). Governance matters. World Bank Policy Research Working Paper, 2196, Washington, DC.
Lee, J-Y. and Mansfield, E. (1996). Intellectual property protection and U.S foreign direct investment. Review of Economics and Statistics 78, 181-186.
MacKinnon , J. G. (1994). Approximate asymptotic distribution functions for unit root and cointegration tests. Journal of Business and Economic Statistics, 12(2), 167-176.
Maria, A. Y. and Ngie, T.T. (2009). Estimating the domestic determinants of foreign direct investment flows in Malaysia : Evidence from cointegration and error-correction model. Jurnal Pengurusan, 28, 3-22.
Papaioannou, E. (2009). What drives international financial flows? Politics, institutions and other determinants. Journal of Development Economics 88, 269-281.
Pesaran, M. H., Y. Shin and R.P. Smith. (2001). Bounds testing approaches to the analysis of level relationship. Journal of Applied Econometric, 16, 289-326.
Quere, B.A., Coupet, M. and Mayer, T. (2007). Institutional Determinants of Foreign Direct Investment. The World Economy, 764-782.
Schmieding, H. (1993). From plan to market: on the nature of the transformation crisis. Weltwirtschaftliches Archiv 129, 216-253.
Verdier, G. (2008). What drives long-term capital flows? A theoretical and empirical investigation. Journal of International Economics 74, 120-142.
Wei, S-J. (1997). Why is corruption so much more taxing than tax? Arbitrariness kills. NBER Working Paper 6255.
Wei, S-J. (2000). How taxing is corruption to international investors? Review of Economics and Statistics 82, 1-11.
Wheeler, D. and Mody, A. (1992). International investment location decisions: the case of U.S firms. Journal of International Economics 33, 57-76.