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Full Length Research Paper
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Does debts
foster economic growth? The experience of Malaysia
Chee-Keong Choong1*, Evan
Lau2, Venus Khim-Sen Liew2 and
Chin-Hong Puah2
1Centre for Economic
Studies, Faculty of Business and Finance, University Tunku
Abdul Rahman (Perak Campus), Jalan University, Bandar Barat,
31900 Kampar, Perak, Malaysia.
2Department of Economics,
Faculty of Economics and Business, University Malaysia
Sarawak, 94300 Kota Samarahan, Sarawak, Malaysia.
*Corresponding
author. E-mail:
choongck@utar.edu.my.
Accepted 14 June, 2010 |
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Abstract |
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The study
examines the effect of different types of debts
on
the economic growth in Malaysia
during the sample period 1970 - 2006.
Using cointegration test,
the findings suggest that all
components of debts have a negative effect on long-run economic
growth. In addition, the Granger causality test reveals the
existence of a short-run causality linkage between all debt
measures and economic growth in the short-run. The policy
conclusion is that an increase in foreign debt level adversely
influences economic performance, whereas the decline in the rate
of economic growth weakens the ability of the country to service
its debt.
Key words:
Debts, economic growth,
debt overhang,
cointegration, causality. |
