39. Factors Affecting External Debt in Malaysia: An Empirical Investigation

This paper provides empirical evidence of the determinants that contribute to the factors affecting external debt in Malaysia, covering the period of 1972–2012. We use time series econometric tools to investigate the relationship among the variables. The augmented Dickey-Fuller (ADF) test, Granger causality test, and multiple regression analysis are employed in examining the factors such as the dynamic effect of gross domestic product, export, and foreign direct investment toward the level of external debt in Malaysia. The findings indicate that gross domestic product, export, and foreign direct investment are important indicators of the level of external debts. Debt management strategy is crucial for a country because excessive foreign loans could be a detriment to the country’s economic situation.