Macroeconomic factors affecting Malaysia’s GDP from 2000 to 2019

This study investigates the factors that determine Malaysia’s economic growth. The determinant factors used are Government Expenditure (GE), Balance of Trade (X-M), and Foreign Direct Investment (FDI) in Malaysia from the year 2000 to 2019. Three main theories were used in this study which are Keynesian’s, Wagner’s Law and The Theory of Exchange Rates on Imperfect Capital Markets in determining factors which contribute to Malaysia’s economic growth. The methodology used was OLS regression analysis which is to analyse the relationship between Malaysia’s economic growth and the determinant factors. Overall, findings show that the rising of total government expenditure (GE) and foreign direct investment (FDI) have a significant and positive relationship with economic growth. However, Balance of Trade (X-M) has a negative and insignificant relationship with the economic growth. The study concludes that government expenditure (GE) and foreign direct investment (FDI) play important roles as determinant factors to Malaysia’s economic growth and Balance of Trade (X-M) may have a role as a catalyst and complement determinant factor to economic growth in Malaysia.