The Impact of Fiscal Policy on Economic Growth in Malaysia

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dc.contributor.authorChung Shan Feng
dc.date.accessioned2026-08-20T07:03:46Z
dc.date.issued2024
dc.descriptionThis study investigates the impact of fiscal policy components, such as government expenditure, tax revenue, and subsidies on Malaysia's economic growth over the period from 1985 to 2023. Grounded in theoretical frameworks such as Keynesian theory, the Neoclassical Growth Model, and the Endogenous Growth Model, the research employs rigorous time-series econometric techniques, including unit root tests, Johansen cointegration, the Vector Error Correction Model (VECM), and Granger causality tests to assess both the short-run dynamics and long-run relationships between fiscal instruments and Gross Domestic Product (GDP). The findings reveal that government expenditure and subsidies significantly influence economic growth in both the short and long term, while the effects of tax revenue are less consistent, suggesting the presence of structural inefficiencies and challenges in Malaysia’s fiscal architecture. Granger causality analysis indicates unidirectional and bidirectional relationships among the variables, underscoring complex interdependencies. The study contributes to the empirical literature by contextualizing fiscal policy within Malaysia’s evolving economic landscape, shaped by external shocks such as the Asian Financial Crisis, the Global Financial Crisis, and the COVID-19 pandemic. It further highlights the implications of recent fiscal reforms, such as targeted subsidy implementation and efforts toward revenue diversification, for achieving fiscal sustainability and inclusive growth. The research offers policy recommendations focused on enhancing public expenditure efficiency, broadening the tax base, and strengthening the governance of subsidy programs. These insights are vital for policymakers seeking to craft resilient and equitable fiscal strategies in the face of mounting fiscal deficits, public debt pressures, and global uncertainties.
dc.identifier.urihttps://scholarhub.unimas.my/handle/123456789/1726
dc.language.isoEnglish
dc.publisherUniversiti Malaysia Sarawak (UNIMAS)
dc.relation.ispartofseriesFaculty of Economics and Business
dc.subjectFiscal Policy, Economic Growth, Government Expenditure, Tax Revenue, Subsidies
dc.titleThe Impact of Fiscal Policy on Economic Growth in Malaysia
dc.typeFinal Year Project

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