Factors involved in Economic Development and their Impact on State-Building in Malaysia
Abstract
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The current study takes its inspiration from the successful history of poverty elimination in Malaysia that’s make it a model economy, and also investigates the role of state-building in achieving this success. Aim of the study is to examine the factors involved in economic development their impact on state-building. The autoregressive distributed lag (ARDL) model was employed to test the economic factors affecting state-building. The study covered thirty seven years period. The long run co-integration in the model has been confirmed, and econometric diagnostic tests are identified. This study findings showed that human capital, oil rent, and per capita income, positively and significantly affected the state-building in the long run. In the short-run, human capital and oil revenue effected positively and significantly. Population growth, democracy, inflation, and financial development have confirmed a negative and significant impact on the statebuilding. Policy implication has highlighted the importance of human capital development, macroeconomic stability, and population growth in Malaysia's state-building. Demographic transition exerted a considerable negative effect on the state-building in the long run, affecting economic health, and steady-state growth. The negative impact of financial development on state-building to promote economic is a worrisome. The study recommended that the economic policymakers and relevant bureaucracies should implement a prudent fiscal policy to the fiscal deficit and facilitate domestic financial institutions into the credits based on the findings. Currently, Malaysia is facing a demographic threat in the long run due to the aging/increased population and low fertility rate, therefore, it is essentially important to re-address the policy regarding population.
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