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Malaysia's economy suffers from high public expenditures, especially current expenditures, which has led to a high percentage of the budget deficit. The research aims to identify the macroeconomic variables affecting the budget deficit in Malaysia and to identify the existence of a long-term relationship and a causality relationship between the budget deficit in Malaysia as a dependent variable, and the independent variables explaining it. The research relied on descriptive and quantitative analysis methods, as based on a variety of statistical and econometrics methods, including the use of the growth function, the unit root test (ADF), cointegration analysis and the Granger causality test to ensure the existence of causality between variables and determine the direction of that relationship. The research was based on annual time series data covering the period 1990-2019. The study model included: the budget deficit variable in Malaysia (% of GDP) as a dependent variable, while the independent variables are: government spending, fixed capital formation, public debt, foreign direct investment, exchange rate, average interest rate, and economic growth rate. The stability of the variables was tested using the ADF test in order to determine the degree of stability of the variables. The results showed that the time series under study are not stable at the level, but they are all stable at their first differences I(1). The results of the multiple regression model showed that the signs of the coefficients of the independent variables are consistent with economic logic, and that together they explain about 87.1 percent of the changes in the budget deficit in Malaysia during the study period. The regression coefficients for the variables of government expenditure, fixed capital formation, and foreign direct investment were positive to express the existence of a direct relationship between these independent variables and the budget deficit in Malaysia, as a dependent variable, while it is noted that the regression coefficient for the variables of public debt and the exchange rate The average interest rate and economic growth rate were negative, which is consistent with economic theory. It also turns out that the most important relative variable in influencing the dependent variable in the previous estimated model is the public debt variable, while the average interest rate variable comes in last. The results of cointegration indicated the presence of three vectors of cointegration between these variables, which confirms the existence of a long-term equilibrium relationship between the public budget deficit in Malaysia and the independent variables affecting it. The results of the Granger causality test also indicated the existence of a unidirectional causal relationship heading from government spending to the budget deficit, meaning that increasing government spending causes a budget deficit, and the existence of a unidirectional causal relationship that goes from foreign direct investment to the budget deficit, from the average interest rate to the budget deficit, and from the budget deficit to the exchange rate, and it also shows the existence of a causal relationship. There is a bidirectional relationship between the size of the public debt and the public budget deficit, and between the economic growth rate and the budget deficit in Malaysia. [ABSTRACT FROM AUTHOR]

This study seeks to ascertain whether there is an unbalanced link between CO2 emissions, foreign direct investment, and economic growth in Malaysia over a 40-year timeframe between 1980 and 2019. We investigated the asymmetric relationship , using non-linear autoregressive distributed lag (NARDL) technique. The findings showed a noteworthy asymmetry between FDI, CO2 emissions, and GDP in Malaysia. The long-term and short-term effects of negative FDI on GDP are both equivalent to 0.028 and 0.021, respectively. This suggests that, compared to short-term fluctuations, long-term negative FDI adjustments have a considerably more negative impact on economic growth. The coefficient of positive (CO2+) and negative (CO2−) changes in economic growth is equal to 0.086 and − 0.152, respectively. It indicates that positive changes in CO2 emissions have stronger effects in the long run than negative shocks. Considering an asymmetric association between these two variables in the short and long term, Malaysian policymakers must comprehend the dynamic relationship between FDI, CO2 emissions, and GDP to plan appropriate economic and environmental policies that will support sustainable economic development and ensure a safer environment. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to investigate the links between renewable energy (RE), non-renewable energy (NRE), capital, labour and economic growth, using the nonlinear autoregressive distributive lag (NARDL) model in Malaysia for the period of 1980–2018. The results of NARDL confirm the asymmetric effect of RE and NRE consumption on the economic growth in the long run as well as the short run in Malaysia. The findings also show that in the long and short run, positive shocks of NRE are greater than the positive shocks of RE. It indicates that Malaysia's economic growth is highly dependent on NRE which is not a good indication as NRE consumption increases carbon dioxide (CO2) emission in the country. Moreover, the empirical results of this study demonstrated that RE consumption reduction accelerates economic growth, whereas NRE consumption reduction decreases economic growth. It can have claimed that in Malaysia, RE is still more expensive than NRE. In conclusion, this study offered a variety of measures to develop RE to reduce the dependency on NRE consumption. [ABSTRACT FROM AUTHOR]

One of humanity's most significant problems in the twenty-first century revolves around how to balance the mitigation of environmental pollution while achieving sustainable economic development. Despite increased awareness and dedication to climate change, the planet is still seeing a drastic decrease in the volume of pollutant emissions. This study explores the long-run and causal impact of economic growth, financial development, urbanization, and gross capital formation on Malaysia's CO2 emissions based on the STIRPAT framework. The current paper employs recently developed econometric techniques such as Maki co-integration, auto-regressive distribution lag (ARDL), fully modified OLS (FMOLS), dynamic ordinary least square (DOLS), and wavelet coherence and gradual shift causality tests to investigate these interconnections. The advantage of the gradual shift causality test is that it can capture the causality in the presence of a structural break(s). The findings from the Maki co-integration and ARDL bounds tests reveal evidence of cointegration among the variables. The ARDL test reveals that economic growth, gross capital formation, and urbanization exert a positive impact on CO2 emissions. Furthermore, the wavelet coherence test reveals that there is a significant dependency between CO2 emissions and economic growth, gross capital formation, and urbanization. The Toda Yamamoto and Gradual shift causality tests reveal that there is a (a) unidirectional causality from urbanization to CO2 emissions, (b) unidirectional causality from economic growth to CO2 emissions, and (c) unidirectional causality from gross capital formation to CO2 emissions. [ABSTRACT FROM AUTHOR]

Validity of the environmental Kuznets curve (EKC) hypothesis is consistently and widely debated among economists and environmentalists alike throughout time. In Malaysia, transport is one of the "dirtiest" sectors; it intensively consumes energy in powering engines by using fossil fuels and poses significant threats to environmental quality. Therefore, this study attempted an examination into the impact of corruption on transport carbon dioxide (CO2) emissions. By adopting the fully modified ordinary least squares, canonical cointegrating regression, and dynamic ordinary least squares in performing long-run estimations, the results obtained based on the annual data spanning from 1990 to 2017 yielded various notable findings. First, more corruption would be attributable towards increased transport CO2 emissions. Second, a monotonic increment of transport CO2 emission was seen with higher economic growth and thus invalidated the presence of EKC. Overall, this study suggests that Malaysia has yet to reach the level of economic growth synonymous with transport CO2 emission reduction due to the lack of high technology usage in the current system implemented. Therefore, this study could position policy recommendations of use to the Malaysian authorities in designing the appropriate economic and environmental policies, particularly for the transport sector. [ABSTRACT FROM AUTHOR]

Malaysia and Indonesia are two countries in Southeast Asia region that has established a long-standing close relationship due to similarity in culture and socioeconomic background. Statistics on the arrival of tourists reveals that both countries are interdependent in attracting tourists during the period of study. Traditonally both Malaysia and Indonesia are very popular in tourism which are focused on enviromental attractions, rich cultural heritage and religious tourism which had become an attraction among international tourists. This study uses monthly data for the period from 1995-2016 by applying the concept of Almost Ideal Demand System (AIDS) to investigate the extent tourism prices and volatility of global oil prices determines the bilateral tourism demand between these two countries. The results of this study reveal that Malaysian tourists to Indonesia displays a bidirectional Granger causality relationship with the effect of elastic oil prices. On the other hand, the presence of Indonesian tourists to Malaysia has a unidirectional Granger causality relationship towards the elasticity of demand of tourism prices in Thailand. Both countries have a differing level of speed of adjustment from short run equilibrium to long-run equilibrium with the magnitude of 10.8% (for Malaysian tourist to Indonesia) and 33% (for Indonesian tourist to Malaysia). It is evident that tourism development between these two countries have grown immensely and impacted the economic growth of these countries. As such, we can conclude that bilateral tourism demand between Malaysia and Indonesia does not have any influence on tourism price elasticity of demand. The findings of this study are useful to policy-makers to plan strategies to increase the bilateral tourism demand as a long-term strategy specifically in transforming Southest Asia region which has its own uniqueness as an attractive international tourist destination. [ABSTRACT FROM AUTHOR]

This research article aims to investigate the moderating role of financial development in Environmental Kuznets Curve (EKC) in the context of Malaysia for the period 1970–2016. As the time series variables are integrated of different order therefore, Auto-Regressive Distributed Lag (ARDL) model has been employed to estimate the long-run equilibrium relationship among the variables. The results indicate that EKC does exist for Malaysia and financial development has negative impact on carbon emission. Moreover, financial development is found to have significant moderating impact on income environment relation. More financial development brings early turning point of the EKC. The results recommend that financial development can be used as one of the policy measures to reduce the environmental cost of economic growth in Malaysia. [ABSTRACT FROM AUTHOR]

This study focuses on the relationship among the energy consumption, carbon emission and economic growth of Malaysia by using a time series data from 1980-2016. The study findings are shown by an econometric analysis that energy consumption, total and per capita CO2 emission and gross domestic product (GDP) has increased vastly between 1980 and 2016. The Johansen cointegration test confirms the existence of the long run relationship of energy consumption with carbon emission and economic growth. Moreover, the Granger causality test reveals the unidirectional causality of energy demand and population with carbon emission. The positive and significant relationship between GDP and carbon emission is a critical issue in Malaysia that needs to be addressed with care as economic growth is necessary but increase of carbon emission is undesirable. Therefore, this study recommends to promote green energy, green growth (GDP) that will ensure both energy security and energy sustainability in Malaysia over time. [ABSTRACT FROM AUTHOR]

The aim of this study is to investigate the dynamic movement between sectoral indices in the Malaysian Stock Market and the three macroeconomic variables, namely oil price (OP), gold price (GP), and exchange rate (ER) during the period 1995-2014. Using the Augmented Dickey- Fuller and Phillip Perron unit root test, the underlying series are tested as non-stationary at the level but stationary in first difference. The use of Johansen-Juselius (1990) Multivariate Cointegration and Vector Error Correction Model indicate that there is long run linkages between macroeconomic variable and sectoral indices specifically in Technology sector. Meanwhile, the analysis based on Vector Auto regression Model technique indicates that there are short run linkages between macroeconomic variable and sectoral indices namely Financial, Industrial, Consumer Product, Industrial Product, Properties and Trade and Service. [ABSTRACT FROM AUTHOR]

This study is the first attempt to investigate the relationship between the level of risky assets and capital level in a mixed Malaysian banking system covering 83 months starting December 2006. The results of dynamic ordinary least squares indicate positive relationship between capital ratio (CAR) and risk-weighted asset ratio (RWA) in the long run. Furthermore, the causality analysis based on panel vector error correction model (VECM) and two-step dynamic system generalized method of moments indicates unidirectional causality from CAR to RWA. Our results further suggest that higher capital growth and capital buffer provide an extra cushion for the Malaysian banks to pursue relatively riskier financial activities, and the nature of risk-taking behavior of Islamic banks follows that of the conventional banks. [ABSTRACT FROM AUTHOR]

Manuscript type: Research paper Research aims: This study aims to investigate the impact of macroeconomic forces on the Malaysian Islamic stock market. Design/ Methodology/ Approach: The study employs Auto Regressive Distributed Lag (ARDL) bound testing approach and Vector Error Correction Model (VECM) in an attempt to investigate the impact of macroeconomic forces on the Malaysian Islamic stock market. Various domestic economic factors including money supply, industrial activities, inflation, Islamic interbank rate and international issues (e.g., real effective exchange rate and Federal funds rate), are taken into consideration in the analysis. Research findings: Based on the ARDL approach, this study finds that all macroeconomic factors, with the exception of Islamic interbank rate are significantly related to Islamic stock price in the long term. However, the findings from VECM method confirm the significant causal flow from all macroeconomic forces into Islamic stock prices in the longer term. Nevertheless, in the short term, only Islamic stock prices have immediate replies in response to the industrial activities, inflation, real effective exchange rate and Federal funds rate data. Theoretical contributions/ Originality: While there is vast literature on the Islamic stock market, the effect of macroeconomic forces on the Islamic stock price has not been well-researched. This study fills in the gap by investigating the relationship between macroeconomic variables and Islamic stock price. Practitioner/ Policy implications: The findings demonstrate that investors and policymakers should take into account the fluctuations in the macroeconomic variables since they have high information content regarding the future movements of Islamic stock price. The foreign factors, in particular, depict stronger influence on the Islamic stock market than the domestic factors. Research limitations/ Implications: Cheaper currency would accelerate export sector and recovery of the U.S. economy might put Islamic stock market at disadvantage because there is possibility that international investors will switch back their investment. [ABSTRACT FROM AUTHOR]

To make broader policy decisions and have an economic glimpse, macroeconomic linkages are pertinent to the policy makers and the economists. The proper understanding of these interactions guides the monetary authorities to synthesize the appropriate monetary policy as well the as the political regimes to adopt feasible fiscal policy. Realizing the crucial importance of exchange rate, inflation and interest rate in an economy, this study investigates the interaction between the exchange rate and, inflation and interest rate in an important economy of Southeast Asia, Malaysia. Employing autoregressive distributed lags (ARDL) approach to co-integration and vector error correction model (VECM), we investigate the null hypothesis (H0) of no long run relationship as well the direction of the causality in case of rejection of (H0) in prior case. The findings suggest that the long run relationship is present between the interest rate and exchange rate, and inflation and exchange rate. Exchange rate experience the positive influence from interest rate whereas negative from inflation. Moreover, there is unidirectional causality from inflation and interest rate towards exchange rate. [ABSTRACT FROM AUTHOR]

Purpose – This purpose of this paper is to empirically examine the contribution of the Islamic banking and financial institutions (IBFIs) to economic growth in Malaysia. Design/methodology/approach – Focusing on the post-1997 economic turmoil, the paper relies on several time series tests, such as autoregressive distributed lag (ARDL), vector error correction model (VECM) and variance decompositions (VDCs). Findings – The paper documents significant role played by the IBFIs in Malaysian economy. In particular, significant unidirectional causality was found from the IBFIs development to economic growth, supporting the finance-growth led hypothesis or the supply-leading view. Research limitations/implications – The paper only focuses its analysis on the role of the IBFIs in the Malaysian economy and not the financial sector as a whole. Thus, the findings of this paper are indicative, but inconclusive for the entire financial sector in the country. Practical implications – Continuous efforts should be undertaken to promote the development of the Islamic banking industry due to its significant contribution to Malaysia’s economic growth by further improving the Islamic financial infrastructure, increasing the pool of human capital in the Islamic banking industry, providing conducive legal environment to the IBFIs and maintaining the Islamic financial sector stability. Originality/value – This paper is the first attempt to empirically assess the contribution of Islamic banking institutions in Malaysia using ARDL, VECM and VDCs. [ABSTRACT FROM AUTHOR]

The present study examines the presence of Environmental Kuznets Curve (EKC) in Malaysia by investigating impact of globalization (including overall, social, economic and political) on ecological footprint in the Malaysian economy using quarterly data from 1970 to 2018. This research utilizes the Quantile Autoregressive Distributed Lag (QARDL) method. This approach is useful as it depicts the causality patterns through various quantiles of the globalization and environmental degradation by providing more comprehensive explanations of the over-all dependence among the aforementioned variables almost ignored by the traditional approach (for instance ARDL and OLS). The outcomes of QARDL showed that the error correction coefficient is significant with the anticipated negative sign for all quantiles. This outcome provides evidence on the presence of considerable return to the long-run equilibrium association between the factors of interest and environmental degradation. Overall, the results recommended that overall globalization and economic globalization enhance the level of environmental degradation in the long run, however, political and social globalization help to reduce the level of environmental degradation in the long term. Moreover, the results of QARDL also confirmed the existence of inverted U-Shape curve in the Malaysian economy. In the shorter-run period, this study found a significant negative impact of overall globalization and political globalization on environmental degradation. The results recommended that the Malaysian government and policymakers need to give more attention to social and political globalization to achieve the goals of sustainable environment in the long-run equilibrium. [ABSTRACT FROM AUTHOR]