Understanding Fiscal Choices: A Holistic View of Public Spending in Malaysia
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Universiti Malaysia Sarawak (UNIMAS)
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This research looks at how different types of public spending affect Malaysia’s economic growth from 1981 to 2023. It follows ideas from Keynesian theory and Wagner’s Law. The dependent variable is nominal GDP. Public spendings are the independent variables. Interest rate is used as a control variable. The research uses several methods. These include the ARDL model, crisis dummy regression, Granger causality test, impulse response function, and variance decomposition. These tools help show both short-term and long-term effects. The results show that development spending, like on general administration, helps the economy grow. But some types of spending, like subsidies, have weaker or mixed results. Economic crises also change the way spending affects growth. These include the 1998 Asian Financial Crisis, the 2009 Global Financial Crisis, and the 2020 COVID-19 pandemic. This research gives clear findings for each spending sector. It also gives useful ideas on how the government can spend better to support long-term and stable economic growth in Malaysia.