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Type :thesis
Subject :HD Industries. Land use. Labor
Main Author :Asmawi Hashim
Title :Impact of budget deficit formation on economics growth in Malaysia
Place of Production :Tanjong Malim
Publisher :Fakulti Pengurusan dan Ekonomi
Year of Publication :2021
Corporate Name :Universiti Pendidikan Sultan Idris
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Abstract : Universiti Pendidikan Sultan Idris
The  relationship  between  budget deficit  and  economic  growth  is  one  of  the  most important  issues debated by economists and policymakers in developed and developing countries. The purpose of this study is to examine the relationship  by concentrating on  theoretical  debates, empirical  studies and  econometric  models  to  obtain substantive  conclusions.   These   conclusions   are  beneficial   in   the  field  of   macroeconomics.  Construction or development of macroeconomic  models is used to analyze the impact of budget  deficit on Malaysia’s  economic  growth. The  effects of  the budget deficit formation would lead  to the formation of other macroeconomic variables, such as debt, rising   interest   rates   and    decreasing   government   spending,   productive  or   non- productive. This  study was conducted  using time series  data collected from 1985 to 2018 to fulfil three specific objectives. The first  objective is to identify the relationship that exists between all the selected variables and Gross  Domestic Product (GDP) in the prescribed regimes. The second objective is to compare the effects of  deficit formation on economic growth and the last objective is to investigate the dominant factor  across regime. The Auto-Regressive Distributed Lag (ARDL) model is used to analyze the co-  integration  and  causal  direction  relationship  between budget  deficit  and  economic   growth. The  results  show  a long-term  relationship  of  all  the selected  variables  with   GDP. This finding supported with the value of Error Correction Term (ECT) at -3.9874  and significant  at level  99 percent, in  general model.  In addition, there are different   effects of budget deficits and dominant factor in each regime. This  result supports the  hypotheses  set  out  in  this  study. There  are  existences  of  a  long-term  relationship   between the two variables, a deficit-GDP effect and different dominant factor in each   regime.  In  conclusion,  the  formation  of  a  budget  deficit  that  further  forms  other  macroeconomic  variables  in  the  economy  is  seen  to  have  an  empirical  impact  on   Malaysia's GDP. This study is expected to contribute to the idea that, there are several   dynamic factors impacting  the formation of budget deficit  on GDP. Comprehensive  knowledge is  a necessary  in  efforts to increase  productivity and living  standards of   people to ensure the stability of Malaysia’s  economic system in future.   

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