The Impact of Labour Force Participation in Economic Growth: Evident from Malaysia

Woon, Chee Howe (2022) The Impact of Labour Force Participation in Economic Growth: Evident from Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

This paper investigates the relationship between labour force participation among macroeconomics factors such as gross domestic product and gross fixed capital formation in Malaysia. This paper examines the relationship between labour force participation, gross domestic product and gross fixed capital formation in Malaysia from year 1990 to year 2019 which consists of 30 observations. This research employed several analysis tools such as Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) Unit Root Test, Lag-length selection, Bound Test Checking, Autoregressive Distributed Lag (ARDL), Vector Autoregressive (VAR) Block Exogeneity Test and VAR estimates to evaluate the relationships. ADF Unit Root Test adopted to identify whether the data is stationary. Laglength selections is utilized to determine appropriate lag length. Bound Test Checking and ARDL approach is used to examine whether there is long-run relationship among the variables. VAR Block Exogeneity Test treated as Granger Causality Test to investigate the casual relationship and to clarify the effects on labour force participation rate in the future following Gross Domestic Product (GDP) and Gross Fixed Capital Formation (GFCF) of current year. VAR estimated is utilised to determine how much the changes of one variable to another variable. Diagnostic Checking such as Heteroskedasticity and Autocorrelation will be used to examines whether the model is free from heteroskedasticity and autocorrelation problems. Normality test such as Jarque-Bera test is utilized to examine whether the data from the model have normality distributed. The appropriate interpretation for the above models will be provided and empirical issues will also be addressed.