An assessment of Malaysia’s fiscal deficit and current account balance using a nonlinear approach
Amidst the COVID-19 crisis, the Malaysian government responded decisively, implementing substantial fiscal expansion measures to combat the pandemic's spread and safeguard the economy. In the second quarter of 2020, the current account surplus decreased to RM5.6 billion, or 1.7% of GDP, raising...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Universiti Putra Malaysia
2024
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| Online Access: | http://psasir.upm.edu.my/id/eprint/116481/ http://psasir.upm.edu.my/id/eprint/116481/1/116481.pdf |
| _version_ | 1848867013384994816 |
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| author | Ramasamy, Kanageswary Said, Rusmawati Ismail, Normaz Wana |
| author_facet | Ramasamy, Kanageswary Said, Rusmawati Ismail, Normaz Wana |
| author_sort | Ramasamy, Kanageswary |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | Amidst the COVID-19 crisis, the Malaysian government responded decisively, implementing substantial fiscal expansion measures to combat the pandemic's spread and safeguard the economy. In the second quarter of 2020, the current account surplus decreased to RM5.6 billion, or 1.7% of GDP, raising concerns of a twin-deficit. Keynesians relate fiscal deficits to the twin-deficit hypothesis. This study will use data from 2008Q1 to 2022Q4 to investigate the validity of the theory on Malaysia in the aftermath of the COVID-19 pandemic. For empirical analysis, the Nonlinear Autoregressive Distributed Lag (NARDL) approach will be used. Results show that fiscal deficits have neither short- or long-run effect on the current account, confirming the Ricardian Equivalence Hypothesis (REH), which holds that fiscal deficits do not affect the current account balance. In addition, research findings confirm the significance of economic growth and exchange rates in augmenting the surplus of the current account. Therefore, it is crucial to prioritise the successful execution of the National Investment Master Plan 2030, the Twelfth Malaysia Plan, and the New Industrial Master Plan 2030 in order to effectively address the prevailing economic challenges. These efforts have the potential to boost economic revitalization and foster long-term growth. |
| first_indexed | 2025-11-15T14:29:45Z |
| format | Article |
| id | upm-116481 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T14:29:45Z |
| publishDate | 2024 |
| publisher | Universiti Putra Malaysia |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-1164812025-04-09T02:47:16Z http://psasir.upm.edu.my/id/eprint/116481/ An assessment of Malaysia’s fiscal deficit and current account balance using a nonlinear approach Ramasamy, Kanageswary Said, Rusmawati Ismail, Normaz Wana Amidst the COVID-19 crisis, the Malaysian government responded decisively, implementing substantial fiscal expansion measures to combat the pandemic's spread and safeguard the economy. In the second quarter of 2020, the current account surplus decreased to RM5.6 billion, or 1.7% of GDP, raising concerns of a twin-deficit. Keynesians relate fiscal deficits to the twin-deficit hypothesis. This study will use data from 2008Q1 to 2022Q4 to investigate the validity of the theory on Malaysia in the aftermath of the COVID-19 pandemic. For empirical analysis, the Nonlinear Autoregressive Distributed Lag (NARDL) approach will be used. Results show that fiscal deficits have neither short- or long-run effect on the current account, confirming the Ricardian Equivalence Hypothesis (REH), which holds that fiscal deficits do not affect the current account balance. In addition, research findings confirm the significance of economic growth and exchange rates in augmenting the surplus of the current account. Therefore, it is crucial to prioritise the successful execution of the National Investment Master Plan 2030, the Twelfth Malaysia Plan, and the New Industrial Master Plan 2030 in order to effectively address the prevailing economic challenges. These efforts have the potential to boost economic revitalization and foster long-term growth. Universiti Putra Malaysia 2024 Article PeerReviewed text en cc_by_4 http://psasir.upm.edu.my/id/eprint/116481/1/116481.pdf Ramasamy, Kanageswary and Said, Rusmawati and Ismail, Normaz Wana (2024) An assessment of Malaysia’s fiscal deficit and current account balance using a nonlinear approach. International Journal of Economics and Management, 18 (3). pp. 287-301. ISSN 1823-836X; eISSN: 2600-9390 http://www.ijem.upm.edu.my/vol18no3/1)%20An%20Assessment%20of%20Malaysia.pdf 10.47836/ijeam.18.3.01 |
| spellingShingle | Ramasamy, Kanageswary Said, Rusmawati Ismail, Normaz Wana An assessment of Malaysia’s fiscal deficit and current account balance using a nonlinear approach |
| title | An assessment of Malaysia’s fiscal deficit and current account balance using a nonlinear approach |
| title_full | An assessment of Malaysia’s fiscal deficit and current account balance using a nonlinear approach |
| title_fullStr | An assessment of Malaysia’s fiscal deficit and current account balance using a nonlinear approach |
| title_full_unstemmed | An assessment of Malaysia’s fiscal deficit and current account balance using a nonlinear approach |
| title_short | An assessment of Malaysia’s fiscal deficit and current account balance using a nonlinear approach |
| title_sort | assessment of malaysia’s fiscal deficit and current account balance using a nonlinear approach |
| url | http://psasir.upm.edu.my/id/eprint/116481/ http://psasir.upm.edu.my/id/eprint/116481/ http://psasir.upm.edu.my/id/eprint/116481/ http://psasir.upm.edu.my/id/eprint/116481/1/116481.pdf |