FISCAL ADJUSTMENT AND DYNAMIC ECONOMICS PERFORMANCE: THE CASE OF MALAYSIA

Abstract

The main objective of this study is to identify the link between fiscal adjustment and dynamic economic performance in Malaysia using time series data for entire period of 1980-2009. To examine the long-run relationship between fiscal adjustment and economic performance, this has study employed the Gregory-Hansen cointegration approach to capture the endogenous structural breaks in long-run equilibrium relationship with three different specifications. The finding of this study indicates that there is long-run positive cointegration relationship between fiscal adjustment and economic performance in Malaysia. Therefore, the finding of this study clearly shows that the dynamic and continuous economics performance is a key element of the successful of the stability of Malaysia’s economic in Southeast Asian region, although have faced several economic crisis.Fiscal adjustment, Economic performance, Gregory-Hansen