The relationship between of Public on Economic Growth in Malaysia

TABLE OF CONTENTS
Table of Contents ................................................................................................... ii

List of Tables .......................................................................................................... iv

List of Figures .......................................................................................................... v

List of Abbreviations .............................................................................................. vi

CHAPTER 1: RESEARCH OVERVIEW

1.0 Introduction .................................................................................................... 1

1.1 Research Background ..................................................................................... 1

1.2 Problem Statements ........................................................................................ 6

1.3 Research Questions ........................................................................................ 7

1.4 Research Objectives ....................................................................................... 8

1.4.1 General Research Objective .................................................................... 8

1.4.2 Specific Research Objective .................................................................... 8

1.5 Significance of Study ..................................................................................... 8

1.6 Summary of 5 Chapters .................................................................................. 8

CHAPTER 2: LITERATURE REVIEW

2.0 Introduction .................................................................................................. 10

2.1 Review of Literature ..................................................................................... 10

2.1.1 The Cobb-Douglas Theory .................................................................... 10

2.1.2 The Debt Overhang Theory & Debt Laffer Curve ................................ 11

2.1.3 Empirical Evidence ............................................................................... 12

2.2 Proposed Theoretical Framework ................................................................ 20

CHAPTER 3: METHODOLOGY

3.0 Introduction .................................................................................................. 22

3.1 Theoretical Framework ................................................................................ 22

3.2 Empirical Model ........................................................................................... 24

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 The relationship between of Public on Economic Growth in Malaysia

3.3 Source of Data .............................................................................................. 24

3.4 Empirical Strategy ........................................................................................ 25

3.4.1 Augmented Dickey-Fuller (ADF) Test ................................................. 25

3.4.2 Kwiatkowski, Phillips, Schmidt and Shin (KPSS) Test ........................ 26

3.4.3 Johansen Cointegration test ................................................................... 27

3.5 Model Estimation ......................................................................................... 27

3.5.1 Fully modified Ordinary Least Square (FM-OLS) ................................ 28

3.5.2 Canonical Co-integrating Regression (CCR) ........................................ 28

3.5.3 Dynamic Ordinary Least Square (DOLS) ............................................. 28

3.6 Threshold level of Debt Laffer Curve ......................................................... 29

References ............................................................................................................ 32

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 The relationship between of Public on Economic Growth in Malaysia

LIST OF TABLES

Page

Table 1.1 Entities related to government guarantees 3

Table 2.1 Summary empirical studies for determinants of economic growth 15

Table 2.2 Summary empirical studies for Debt Laffer Curve on

economic growth 19

Table 2.3 Summary empirical studies for debt on economic growth 20

Table 3.1 Expected Sign and Explanation of Variables 23

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 The relationship between of Public on Economic Growth in Malaysia

LIST OF FIGURES

Page
Figure 1.1 Distribution of RM1trillion worth liabilities 2
Figure 1.2: Malaysia government debt and GDP from 1990 to 2018 4

Figure 1.3: The public debt level in the high indebtedness country
and Malaysia (% to GDP) 5

Figure 2.1 Debt Laffer Curve 11

Figure 2.2 Theoretical Framework 21

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 The relationship between of Public on Economic Growth in Malaysia

LIST OF ABBREVIATIONS

ARDL Autoregressive Distributed-lagged Model

ECM Error Correction Model
FEM Fixed Effect Model
GIVE Generalized Instrumental Variable Estimator
OLS Ordinary Least Square
REM Random Effect Model
UCEM Unrestricted Error Correction Model
VARM Vector Autoregression Model
VECM Vector Error Correction Model

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