ISSN: 2222-6990
Open access
Previous researches on the relationship between external debt and economic growth in Malaysia have produced inconsistent results. Despite the intense debate on the link between external debt and economic growth, there is no research that takes the new definition of external debt into consideration. To address this issue, this study seeks to examine the effects of external debt on economic growth by allowing the external debt to be taken into consideration especially in terms of the non-residents holding of local-currency denominated debt securities. Using time series econometric approaches and quarterly data of Malaysia from 1997 Q1 to 2016 Q4, this study finds that there is a significant positive relationship between external debt and economic growth. In addition, the results of Granger causality test reveal the existence of short-run bilateral causality relationships between external debt and economic growth.
Abdelhadi, S. A. (2013). External Debt and Economic Growth?: Case of Jordan (1990-2011 ). Journal of Economics and Sustainable Development. 4(18):26–33.
Abdullah, A. S., Razali, N. M. (2017). Factors Affecting Foreign Investors’ Bondholding in Malaysia. Quarterly Bullentin, Bank Negara Malaysia. (June), 33–40.
Ahmed, Q. M., Butt, M. S., Alam, S. (2000). Economic Growth, Export, and External Debt Causality: The Case of Asian Countries. Pakistan Development Review. 39(4 PART II), 591–608.
Bakar, N. A. A., Hassan, S. (2008). Empirical Evaluation On External Debt of Malaysia. International Business & Economics Research Journal. 7(2), 95–108.
Bank Negara Malaysia. (2014). Economic and Financial Development in Malaysia in the First Quarter of 2014. Ref. No.: 05/14/05. (May).
Bank Negara Malaysia. (2016). Annual Report. Kuala Lumpur: Bank Nagara Malaysia.
Choong, C., Lau, E., Liew, V. K., Puah, C. (2010). Does Debts Foster Economic Growth? The Experience of Malaysia. African Journal of Business Management. 4(8), 1564–1575.
Clements, B., Bhattacharya, R., Nguyen, T. Q. (2003). External Debt, Public Investment, and Growth in Low-Income Countries. IMF Working Papers No.03/249. Washington DC.: International Monetary Fund.
Cordella, T., Ricci, L. A., Ruiz-Arranz, M. (2010). Debt Overhang or Debt Irrelevance? IMF Staff Papers. 57(1), 1–24.
Daud, S. N. M., Ahmad, A. H., Azman-Saini, W. N. W. (2013). Does External Debt Contribute to Malaysia Economic Growth? Economic Research-Ekonomska Istraživanja. 26(2), 51–68.
Dotsey, M., Sarte, P. D. (2000). Inflation uncertainty and growth in a cash-in-advance economy. Journal of Monetary Economics. 45(3), 631–655.
Elbadawi, I., Ndulu, B., & Ndung’u, N. (1997). Debt Overhang and Economic Growth in Sub-Saharan Africa. External Finance for Low-Income Countries.
Ernst & Young. (2018). Budget 2019: Malaysia. Ernst & Young Tax Consultants Sdn. Bhd. 6(5).
Fosu, A. K. (1999). The External Debt Burden and Economic Growth in the 1980s: Evidence from sub-Saharan Africa. Canadian Journal of Development Studies/Revue Canadienne D’études Du Développement. 20(April 2015), 307–318.
Griffin, K. B., Enos, J. T. (1970). Foreign Assistance: Objectives and Consequences. Economic Development and Cultural Change. 18(3), 313–327.
International Monetary Fund. 2016. Staff Report for the 2016 Article IV Consultation. IMF Country Report No.16/110. Washington DC.: International Monetary Fund.
Jayaraman, T. K., Lau, E. (2009). Does external debt lead to economic growth in Pacific island countries. Journal of Policy Modeling. 31(2), 272–288.
Jilenga, M. T., Xu, H., Gondje-Dacka, I.-M. (2016). The Impact of External Debt and Foreign Direct Investment on Economic Growth: Empirical Evidence from Tanzania. International Journal of Financial Research. 7(2), 154–162.
Krugman, P. (1988). Financing VS. Forgiving a Debt Overhang. Journal of Development Economics. 29, 253–268.
Lau, E., Lee, A. S.-Y., Baharumshah, A. Z. (2015). External Debt and Economic Growth Nexus: Evidence From Malaysia, Thailand and Philippines. 16th International Academic Conference, Amsterdam. 292–304.
Munir, Q., Mansur, K., Furuoka, F. (2009). Inflation and Economic Growth in Malaysia — A Threshold Regression Approach. ASEAN Economic Bulletin. 26(2), 180.
OECD. (2019). OECD Economic Surveys: Malaysia 2019. OECD Publishing. (July). Retrieved from www.oecd.org/eco/surveys/economic-survey-malaysia.htm
Pattillo, C., Poirson, H., Ricci, L. (2002). External Debt and Growth. IMF Working Papers 02/69, 1–47.
Pesaran, M. H., Shin, Y., Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics. 16(3), 289–326.
Poulson, B. W., Kaplan, J. G. (2008). State Income Taxes and Economic Growth. Cato Journal. 28(1), 53–70.
Reinhart, C. M., Rogoff, K. S. (2010). Growth in a Time of Debt. American Economic Review: Paper & Proceedings. 100, 573–578.
Roscoe, M., Duggar, E. H. (2016). The Evolution of Emerging Markets External Debt: Private Sector Debt Drives Broad-Based Build- Up of Emerging Markets External Vulnerability Risks. Moody’s Investors Service Report.
Schclarek, A. (2004). Debt and Economic Growth in Developing and Industrial Countries. Lund University Working Paper No. 2005:34. Lund: Department of Economics, Lund University.
Schclarek, A., Ramon-Ballester, F. (2005). External Debt and Economic Growth in Latin America. mimeo. Lund: Department of Economics, Lund University.
Shabbir, S. (2013). Does External Debt Affect Economic Growth: Evidence from Developing Countries (63), 1–20.
Were, M. (2001). The Impact of External Debt on Economic Growth in Kenya An Empirical Assessment. UNU-WIDER Discussion Paper No. 2001/116.
In-Text Citation: (Alwi et al., 2020)
To Cite this Article: Alwi, S. F., Lee, H.-A., Azman, N. S., & Lee, H.-H. (2020). External Debts and Economic Growth in Malaysia. International Journal of Academic Research in Business and Social Sciences, 10(12), 755–768.
Copyright: © 2021 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode