An Empirical Study on Trade Openness and Economic Growth : The Malaysian Experience 1970-2002

This paper examine the effects of trade openness on Malaysia's economic growth. This study is based on anually time series for year 1970-2002. In doing this study, a general production function is employed and is expanded by adding trade openness indicators. Two groups of openess measures are used. The first group is the volumes of trade while the second is the trade restriction. The estimated result show that volumes of trade is positively and significantly associated with growth while trade barrier has inverse relationship with growth. The findings are generally in line with the literature and previous empirical studies, with the view that openness of trade is favorable in promoting economic growth

Outward FDI and institutional factors: Malaysian experience / Jen-Eem Chen ... [et al.]

This paper aims to investigate the role of home country institution in affecting outward FDI from Malaysia using data spans from 1980 to 2012. The model specification is examined in autoregressive distributed lag (ARDL) bounds testing framework. The empirical evidence reveals that GDP, exchange rate, openness to trade, and corporate tax rate are the key drivers of outward FDI from Malaysia. This portrays that internationalization strategy of firms is not only relied on home macroeconomic environment, but also home institution. More importantly, corporate tax rate, as one of the institution factors, is positively related to outward FDI which signifies that high tax rate would prompt local firms to engage in investment abroad as a sign of escape response. This reflects that international expansion appears to be exit strategy from home country instead of entry strategy into foreign markets. The findings have some important implications on internationalization strategy of firms

Outward FDI and institutional factors: Malaysian experience

This paper aims to investigate the role of home country institution in affecting outward FDI from Malaysia using data spans from 1980 to 2012. The model specification is examined in autoregressive distributed lag (ARDL) bounds testing framework. The empirical evidence reveals that GDP, exchange rate, openness to trade, and corporate tax rate are the key drivers of outward FDI from Malaysia. This portrays that internationalization strategy of firms is not only relied on home macroeconomic environment, but also home institution. More importantly, corporate tax rate, as one of the institution factors, is positively related to outward FDI which signifies that high tax rate would prompt local firms to engage in investment abroad as a sign of escape response. This reflects that international expansion appears to be exit strategy from home country instead of entry strategy into foreign markets. The findings have some important implications on internationalization strategy of firms

Outward FDI and home country employment

TThis paper aims to explore the effects of Malaysian outward FDI on its home country employment, specifically skilled and unskilled employments. We use annual data spans from 1980 to 2012 that is examined in autoregressive distributed lag (ARDL) bounds testing framework. The findings reveal that national output is positively associated with both skilled and unskilled employments. Interest rate is found to have negative relationship with skilled labour that reflects complementary inputs between labour and capital. The positive and significant relationship between interest rate and unskilled labour indicates the existence of substitution relationship between them. However, we found no empirical evidence showing that outward FDI has a significant impact on skill composition

Tourism development, renewable energy, and environmental quality in Asean: New evidence from panel estimators robust to cross-sectional dependence and heterogeneity

Tourism is widely recognized as a key driver of economic growth and development, yet its dependence on the energy sector has raised concerns regarding its environmental impact. Aiming to elucidate the roles of tourism and renewable energy in shaping the environmental outcomes, this study investigates the nexus between tourism development, renewable energy utilization, and environmental quality across 10 ASEAN countries over a 25-year period from 1995 to 2019 by employing panel estimators robust to heterogeneity and cross-sectional dependence such as Panel Corrected Standard Errors (PCSE), Feasible Generalized Least Squares (FGLS), and Augmented Mean Group (AMG) that are rarely utilized in the ASEAN context. Our findings reveal that tourism activity contributes to CO2 and greenhouse gas emissions, with a 1% increase in tourist arrivals associated with a 0.1 to 0.3% rise in emissions. Moreover, we observe a significant mitigating effect of renewable energy on tourism-induced emissions. Our analysis also lends strong support to the Environmental Kuznets Curve (EKC) hypothesis, indicating a threshold level of GDP per capita of USD 13,000, beyond which the adverse environmental impact of GDP turns positive. The common dynamic process in AMG estimator is found to raise emissions, implying the ASEAN strategic policies on sustainable tourism and energy cooperation may not yet come to fruition given the region’s heavy reliance on non-renewable energy sources to sustain tourism and meet population demands. We conclude with policy implications aimed at fostering sustainable tourism and development in the region

Tourism development and Environmental Kuznets Curve hypothesis in ASEAN countries: New evidence from panel estimators robust to cross-sectional dependence

Tourism development has become one of the key drivers of economic growth in many ASEAN countries, however, the adverse environmental impact of tourism and economic growth has raised significant concerns among the policymakers in region. This study investigates the role of tourism development in the context of Environmental Kuznets Curve (EKC) hypothesis across 10 ASEAN countries over a 25-year period from 1995 to 2019 via panel estimators robust to cross-sectional dependence. The findings reveal tourism contributes to environmental degradation significantly. On the EKC hypothesis, the evidence is mixed as only the Panel Corrected Standard Errors estimation indicates an inverted U-shaped relationship between emissions and GDP per capita. The threshold value of GDP per capita is estimated to be around USD 12,000 showing that the current economic development in ASEAN is still harmful to environment. Furthermore, renewable energy is found to be a strong mitigating factor. Population size, on the other hand, is a significant driver of both CO2 and GHG emissions. The findings of this study highlight the complex relationship between tourism development, economic growth, and environmental quality in the ASEAN region. Subsequently, several policy implications are discusse

Effects of institutional factors on Malaysian outward foreign direct investment, locational choice and employment

This study investigates the push and the pull factors of outward foreign direct investment (FDI) from Malaysia. The study also examines the effects of outward FDI on employment in Malaysia, particularly skilled and unskilled employment. In examining the push factor, or home country environment, that influences the outward investment, we focus on the role of home government institution. Given that Malaysian outward FDI increased tremendously and at the same time there are some indications that Malaysian firms experience high regulatory costs, we are uncertain if Malaysian outward FDI is driven by the institutional escapism.The results of Autoregressive Distributed Lag (ARDL) confirm that Malaysian outward FDI is driven by GDP, exchange rate, inward FDI, and corporate taxation. This portrays that internationalization strategies of firms are not only relied on home macroeconomic environment but also government institution. The significance of corporate taxation in affecting outward FDI explains that high corporate taxation is a regulatory burden to domestic firms which result in the escape response. In contrast, pull factor refers to the location advantages of host countries that attract foreign investors. Though host countries offer attractive location advantages to the investors, the business risks or uncertainties embedded in the investment cannot be neglected. These uncertainties are translated into transaction costs. The selection of host countries is important as it may bring success or failure to the investing firms. To capture the transaction costs, we employ institutional environment of host countries, common colonization, and geographical distance between home and host countries. The regression estimations reveal that the factors determine Malaysian overseas investments are GDP of host countries, low labour cost, availability of natural resources, quality of governance, geographical distance, and common colonization. Outward investment raises the public fears of job-exporting as a result of firms shifting their production plants abroad. Nevertheless, outward FDI would also stimulate the local employment following the expansion in larger foreign markets. Currently, unemployment is not a serious problem in Malaysia. Nonetheless, the retrenchment of workers in recent years deserves our attention. This leads us to inspect the effects of outward investment on Malaysian employment, specifically skilled and unskilled employment. However, we found no empirical evidence that outward investment is statistically significant in affecting skilled and unskilled employment. Overall, the findings of this thesis give some implications to the investing firms in designing their expansion and penetration strategies such as the mode of investment, amount of investment, source of financing and the other aspects

Determinants of outward FDI in developing countries

This paper investigates the determinants of outward FDI in developing countries from home macroeconomics perspective. The study involves 7 developing countries and 3 emerging economies with time span covers from 1980 to 2010. The macroeconomic variables considered in this study are economic development, inward FDI, and trade openness. The findings reveal that economic development has a positive and significant relationship with outward FDI in the long-run. In the mean time, inward FDI is positively and significantly associated with outward FDI in the short-run