Narrow Results

The fiscal reaction function (FRF) provides valuable insights into a country’s fiscal sustainability and output stability. However, there is no consensus yet on how to model it. Thus, this study investigates the best functional form for the FRF by adopting a nonlinear autoregressive distributed lag approach that accounts for a potential structural break in the data across periods. We examine the case of Malaysia and address the country’s data by using a break-point of the unit root test. The test results indicate the presence of a structural break in the country’s FRF. Moreover, the primary balance of Malaysia has an asymmetrical reaction to the country’s public debt and the output gap. This result suggests that a nonlinear behavior of FRF with a structural break is an accurate approach for the fiscal authority in Malaysia (for example, the Ministry of Finance) in designing prudent fiscal policy. This study finds that an asymmetric fiscal reaction in Malaysia neither guarantees fiscal sustainability nor supports output stability, thus suggesting the need for an independent fiscal council to promote prudent fiscal policy.

Using daily data from January 2, 2020 to May 31, 2021, this study empirically examines the day-of-the-week effect in the Malaysian stock market during the coronavirus disease 2019 (COVID-19) outbreak. We also test the impact of the lockdown policy and market sentiment index on the stock market. We resort to ordinary least square regression with generalized autoregressive conditional heteroscedasticity specification. The finding shows that the day-of-the-week effect persisted during the COVID-19 outbreak. Monday’s returns on all selected indices were negative except for the access, certainty, efficiency market. The positive impact of the lockdown policy on Bursa Malaysia is identified after accounting for the day-of-the-week effect. This is due to the market expectation that the lockdown policy can stop the spread of COVID-19, which will lead to recovery. Further analysis uncovers that smaller capitalization stocks benefited more from the government lockdown policy announcements, which come with various stimulus packages that are more favorable to smaller companies. We also find that the United States market sentiment index negatively impacts all indices. This study unlocks and validates the contribution on calendar anomalies’ response during the COVID-19 period for Malaysia. The investment opportunity is available even during the pandemic era, leading to sustainable profit in the long term.

Malaysia is recognized as one of the mega biodiversity countries of the world. However, Malaysia’s biodiversity hotspot experiencing a more pronounce biodiversity loss. Accordingly, the objective of this study is to explore the link between climate change, socio-economic factors and biodiversity loss in Malaysia from 1990 to 2016, with a special focus on different climate change indicators namely rainfall, temperature and carbon dioxide (CO${}_2)$ emissions. Using the autoregressive distributed lag (ARDL) bounds testing approach, this study provides evidence on long-run relation between each of the indicators of climate change and biodiversity loss. The core threats to biodiversity are growing demand for agricultural land, rapid population, elevated temperature, higher CO₂ emissions and rainfall reduction. Interestingly, the biodiversity loss-income nexus is also supportive of the environmental Kuznets curve (EKC) hypothesis; with biodiversity threats increasing with income, beyond a certain level of income, a rise in income reduces the loss of biodiversity. The findings are essential for future studies with a special consideration to reduce the losses of biodiversity.

Malaysia is approaching the aging society status, raising concern about whether population aging is a challenge or an opportunity for Malaysia to attain higher economic growth. Using state-level data from 2011 to 2021, the results show that population aging is negatively associated with economic growth. The economic impact of population aging is substantial and larger than the conventional determinant of economic growth. Further analysis reveals that the growth-deteriorating effect of population aging is transmitted through the labor force and productivity growth channels. The findings urge policymakers to recognize the scope of the new demographic reality and adjust policies to address the economic implications of population aging.

Energy subsidy reform is crucial for nations aiming to transition towards a circular economy. This study examines the relationship between energy subsidies and economic growth in Malaysia from 1978 to 2019, using Autoregressive Distributed Lag, Non-linear Autoregressive Distributed Lag and Multi Threshold Non-linear Autoregressive Distributed Lag models. The study addresses three key objectives: understanding the influence of energy subsidies on economic growth, assessing their asymmetric impact and investigating how they interact with oil prices and energy usage to affect economic growth. The findings reveal several significant relationships. First, energy subsidies exhibit a negative association with economic growth. Second, while energy consumption positively contributes to economic growth, this relationship weakens in the presence of energy subsidies. Third, oil prices have a greater positive impact on economic growth when interacting with energy subsidies. Fourth, reducing energy subsidies leads to a more substantial positive impact on economic growth compared to increasing them. Overall, the presence of energy subsidies in the economy impedes economic growth. We recommend implementing energy subsidy rationalization measures. Malaysia should also prioritize the development of a comprehensive renewable energy master plan to bolster domestic production and consumption, redirecting subsidy funds towards sustainable energy sources and fostering a circular economy.

This paper uses two methodologies to explore the extent to which greater labor force participation among older Malaysians can expand Malaysia’s labor supply. The Milligan–Wise method estimates the potential to increase the labor force participation rate of older Malaysians by estimating how much they would work if they were to work as much as those with the same mortality rate in the past. The Cutler, Meara, and Richards-Shubik (2013) method estimates the same potential by estimating how much older Malaysians would work if they worked as much as their younger counterparts in similar health. We made further simulations to quantify the capacity of older Malaysians to work after they are 60 years old. The results show significant additional work capacity among older people in Malaysia, particularly males, urban dwellers, and those with low educational attainment.

The understanding of the sustainable external imbalances over the 1961-2001 for Malaysia is presented in this paper. The empirical results clearly show that inflows and outflows share a common stochastic trend prior to the 1997 Asian crisis while in the post-crisis period the current account surpluses are on an unsustainable path. Our findings highlight the important role of imports (mainly intermediate inputs) in exports. For an economy that depends on export promotion for its growth process, imports are important in restoring external imbalances to its sustainable steady state path. As illustrated by the recent crisis, the large depreciation of the ringgit contributed to a decline in imports and for an economy that is highly dependent on imported capital, this means an economic slowdown.

Marine Parks are established to protect an area of the sea zoned as a sanctuary for the protection of its marine eco-systems, especially coral reef and its associated fauna and flora, like sea grass bed, mangrove and the sea shore. In Malaysia, there are 6 marine parks to-date. The establishment of marine parks also attracts more tourists to the areas. For example, the number of visitors to Payar Marine Park increased tremendously from 3,668 visitors in 1990 to 133,775 visitors in 2002. However, too many tourists are thought by scientists to have damaged the coral reefs. This paper will estimate how much visitors are willing to pay to reduce damages to three marine parks in Malaysia; Payar, Redang and Tioman Marine Park. Willingness to pay estimates were obtained from the visitors using a double-bounded dichotomous choice version of the Contingent Valuation method.

Productivity indicators within the Malaysian manufacturing sector for the period of 1970–2001 were compared. Two variation models were generated from the production functions to measure manufacturing sector productivity growth. The first model is an extensive growth theory model and the second is an intensive growth theory model. The extensive theory model had a gap that cast doubt in the results. A statistical analysis was provided to close this gap. The results show a slowdown in the contribution of Total Factor Productivity (TFP) growth and low growth of labor productivity of the sector. A negative impact of quality of inputs used by the sector was observed in the contribution of TFP, TFP per unit of labor and labor productivity growth in comparison with other productivity indictors of the sector. The study finds that productivity growth of Malaysia's manufacturing sector is input-driven rather than TFP-driven.

This paper investigates the existence of long-run relationship between unemployment and several key macroeconomic variables in Malaysia, Singapore, and the Philippines. The Johansen–Juselius cointegration method confirms the existence of a stationary long-run cointegration relationship between unemployment and its determinants in all three countries. Exports and foreign direct investment are important determinants of unemployment in Malaysia. In the Philippines, government spending and exports are inversely related to unemployment. In Singapore, only exports appeared as a significant factor in determining unemployment. The results show that the speed of adjustment following a shock is more rapid in Singapore compared to the other two ASEAN countries.

The present paper analyzes the role of stock market, more specifically real stock prices and stock market uncertainty/volatility, on private consumption behavior for an emerging market, Malaysia, using quarterly data from 1991 to 2009. Employing the autoregressive distributed lag approach to cointegration test, the paper establishes a long-run equilibrium that ties private consumption to its determinants — real income, real stock prices, real lending rate, and stock market volatility. In the long run, the presence of the stock market wealth effect is documented. At the same time, the stock market volatility is also noted to depress private consumption particularly when the volatility is at the degree as observed during the Asian crisis. The authors further note the short-run influences of real stock price changes on consumption growth and the adjustment of private consumption to the long-run level when it is modeled in an error-correction setting. Our simple simulation indicates that the drop in the private consumption due to the decline in stock market wealth post-crisis is substantial, amounting to 2.7% of average post-crisis gross domestic product.

This paper examines how socio-demographic and health-lifestyle factors determine participation and duration of leisure-time physical activity in Malaysia. Based on the Malaysia Non-Communicable Disease Surveillance-1 data, Heckman's sample selection model is employed to estimate the probability to participate and duration on physical activity. Results indicate that gender, age, years of education and family illness history are significant in explaining participation probability in leisure-time physical activity. Gender, income level, smoking-status and years of education are significant in explaining the weekly duration conditional on participation, whereas smoking-status and years of education are significant in determining the unconditional level of leisure-time physical activity.

This paper briefly reviews six decades of Malaysia's economic development strategy, which may be described as bounded industrial policy that favors export-led growth. The objective of the current Tenth Malaysia Plan (2011–2015) is to achieve high-income status by 2020 by promoting high-value-added production through increased investments in human capital, adopting new technologies, promoting entrepreneurship to drive innovation and creativity, and elevating domestic demand as an engine of economic growth. Principal components analysis (PCA) and medoid partitioning applied to inflation-adjusted industrial production suggests that Malaysia satisfies the necessary, although not necessarily the sufficient, conditions to achieve this goal.

The objective of this study is to assess the roles of domestic direct investment, foreign direct investment and exports as catalysts of Malaysia's 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.

This study investigates whether government participation in firm ownership leads to better firm performance of publicly listed companies in Malaysia. The sample covers 257 companies listed on the Bursa Malaysia from 1997 to 2009. Multiple regression models with balanced panel data are used to examine the impact of government ownership (GOVN) on firm performance. We find a negative relationship between GOVN and firm performance, a finding that supports the negative public perception of government-linked companies (GLCs) in Malaysia. We conclude that government ownership is not an effective tool for improvement of firm performance in Malaysia.

This paper analyzed whether the child quantity-quality (CQQ) trade-off is applicable in the case of Malaysia. Utilizing the instrumental variable (IV) method, our analysis produces results that are consistent with the hypothesis that the trade-off is unlikely to be applicable to Malaysia as a whole due to the generous public provision of education. However, the results show that the CQQ trade-off exists for the high-income group. Taken together, if both a larger stock of human capital and population are desired, the government should continue to provide education for its people while at the same time maintain policies that stimulate growth.

Although Malaysia has been an integral part of the international production fragmentation network since 1970, empirical investigations on the factors that determine the expansion of these networks are sparse. The paper examines the aforementioned empirical gap in the case of the Malaysian information, communications and telecommunications (ICT) sector using trade patterns in parts and components (PNC). Panel-data estimation from 1990 to 2008 suggests that mobile factors such as relative labor costs and productivity, foreign capital, agglomeration effect, infrastructure development and industrial policies are important in facilitating the international production fragmentation development. Income and domestic prices effect however, are conditional to trade flows.

This paper examines the determinants of total factor productivity (TFP) in the Malaysian automotive industry, focusing on the effectiveness of government policies. Our panel data analysis shows that the productivity of the automotive industry in Malaysia highly depends on the technology embodied within imports. Government policies have not contributed to the technological upgrading of the industry. The policies to protect the domestic producers from international competition and to favor bumiputra firms seem to have adverse impacts on productivity.

In some Asian countries, households import young women from poorer countries to work as live-in caregivers and maids. These caregivers are typically less educated than the child’s mother, so academic performance may suffer. The effects of ever having a foreign maid, a private tutor or a working mother are examined for Malaysian teenagers. Contrary to expectations, those ever having a foreign maid perform better in school examinations, recent private tutoring has positive impacts but earlier tutoring does not, and there is little effect of maternal employment. These results suggest no adverse effects on human capital from outsourcing household production.

Following the Minimum Food Security Quota (MFS-Quota) proposed by Ruiz Estrada (2010) to evaluate and determine the food sustainability of any given country in the event of any natural disaster, this paper sets out to apply the MFS-Quota to test Malaysia’s food storage and supply readiness for any potential natural disaster that may critically affect the socio-economic and political well-being of the country. The primary objective of the MFS-Quota is to calculate the approximate amount of annual food storage that any country needs in order to subsist through any potential natural disaster. As such, any country could build its own MFS-Quota based on its agriculture production system(s) and national food policy focus.