Empirical Analysis of the Relationships between inward FDI and Business Cycles in Malaysia

Manal Suliman Omer, Liu Yao


Globalization has been spreading macro economic effects around the world as well as fueling firms’ cross-national activities. Are there any links between these two influences? This paper chose Malaysia as subject and examined the causal relationships between inward foreign direct investment (FDI) and business cycles. A set of models based on Granger Causality test and VAR Impulse Responses were constructed. Time-series data covered from 1970 to 2008. And the findings clearly indicated that in the case of Malaysia, there is evidence of bi-directional causality and long-run relationships between firms’ (foreign) activities (inward FDI) and business cycle developments in a long term.

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DOI: http://dx.doi.org/10.5539/mas.v5n3p157

Modern Applied Science   ISSN 1913-1844 (Print)   ISSN 1913-1852 (Online)

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