Citation

Noman, Abdullah Muhammad (2022) Impact of public debt on economic growth: Bounds test with structural breaks. Masters thesis, Multimedia University.

Full text not available from this repository.

Abstract

This research mainly explores two focused objectives: to examine the potential impact of public debt on economic growth in Malaysia and determine the country's optimal debt-to-GDP ratio. This study uses 59 years of annual historical data from 1961-2019 from the World Bank Database. Along with Economic Growth as a dependent and Public Debt as an independent variable, this study also examines the effects of Capital Stock, Financial Development, Inflation, Foreign Direct Investment, Real Interest Rate, and Government Consumption on Malaysian economic growth. This study uses Lee and Strazicich's (2003, 2013) one break and two breaks to check the stationary of the variables, followed by the Autoregressive Distributed Lag (ARDL) for bound testing for co-integration and the co-integration along with the long-run coefficient. After that, this study uses a series of diagnostics tests - the serial correlation LM test, Heteroskedasticity test (ARCH), and Ramsey RESET test with the cumulative sum CUSUM and CUSUM squares to examine the autocorrelation and stability of the variables. Besides, this study also uses the Environmental Kuznets Curve (EKC) model to determine the “tipping point” or the optimal debt-to-GDP ratio of Malaysia. In conclusion, this study found a positive relationship between public debt and economic growth in Malaysia. The optimal debt-to-GDP ratio in Malaysia is 50.63% to 66.33%, with an average of 56.20%, marginally higher than the recommended debt ceiling of 55%. The result implies that the Malaysian government should be cautious in leveraging the national debt limit to drive economic growth. Malaysia needs a well and carefully designed fiscal policy to achieve its optimal debt-to-GDP level simultaneously without sacrificing its economic growth.

Item Type:	Thesis (Masters)
Additional Information:	Call No.: HJ8011 .A23 2022
Uncontrolled Keywords:	Debts, Public
Subjects:	H Social Sciences > HJ Public Finance > HJ8001-8899 Public debts
Divisions:	Faculty of Business (FOB)
Depositing User:	Ms Nurul Iqtiani Ahmad
Date Deposited:	29 Aug 2024 02:20
Last Modified:	29 Aug 2024 02:20
URII:	http://shdl.mmu.edu.my/id/eprint/12877

Downloads

Edit (login required)