The Effect of Economic Resilience on Private Investment in Selected Malaysian Economic Sectors

Abstract

Malaysia is a small open economy and is exposed to all sorts of external shocks, interruptions, disruptions or macroeconomic uncertainty. These shocks may cause many potential misfortunes such as periodic economic recessions, fluctuation in the business cycles, unpredictable oil price hikes, financial crises, technological change, crime and natural disasters. The objective of this paper is to analyse the effect of economic resilience on private investment in selected Malaysian economic sectors. The analysis uses secondary panel data that are gathered from various official reports through library research. In the analysis, private investment in selected Malaysian economic sectors represents the dependent variable. Meanwhile, the independent variables are represented by gross domestic product (GDP), interest rates, macroeconomic stability and microeconomic market efficiency. The indicator used to represent macroeconomic stability is fiscal deficit to GDP ratio. Microeconomic market efficiency is represented by government size (government expenditure), regulatory efficiency (business freedom), and market openness (investment freedom). The empirical analysis has been performed using generalized methods of moments (GMM). The results show that GDP, interest rates, and investment freedom are statistically significant at the five percent level of significance.

DOI: 10.5901/mjss.2015.v6n6p374