The Impact of Globalisation on Economic Growth in Malaysia

Cheah, Yee Ling (2026) The Impact of Globalisation on Economic Growth in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study examines the relationship between globalisation and economic growth in Malaysia over a 40-year period from 1985 to 2024. The research is motivated by the "dependency paradox," questioning whether Malaysia’s long-standing reliance on export-led growth remains sustainable amidst evolving global economic conditions. Using the Autoregressive Distributed Lag (ARDL) bounds testing approach, the study analyses the impact of four key variables: trade openness (TO), foreign direct investment (FDI), real effective exchange rate (REER), and net migration (NM) on Real Gross Domestic Product (RGDP). The empirical results confirm a significant long-run equilibrium relationship between these globalization indicators and economic growth. FDI and the REER emerge as the most influential drivers, with FDI facilitating technology transfer and capital formation, while REER stability maintains external competitiveness. Net migration is also found to contribute positively to long-term economic output. Furthermore, Granger causality tests indicate that economic growth itself acts as a driver for increased trade openness and exchange rate movements, suggesting that a strong domestic economy is a precursor to deeper global integration.The study concludes that while globalisation remains a vital engine for development, Malaysia must transition from a labor-intensive, export-driven model toward a balanced, innovation-led approach