Digital Connectivity, Trade Openness and Public Expenditure as Drivers of Economic Development: Evidence from Malaysia (1990–2023)
Keywords:
Economic growth, Public expenditure,, ict, Trade openness, ARDLAbstract
This study examines the impact of public expenditure, digital connectivity, and trade openness on economic growth in Malaysia using time series data of annual observations between 1990-2023. Variables used include GDP per capita (constant 2015 USD) as the independent variable, general government final consumption expenditure (% of GDP) as public expenditure, mobile cellular subscriptions per 100 individuals as an indicator of digital connectivity, and trade openness measured by the sum of exports and imports of goods and services (% of GDP). Autoregressive Distributed Lag (ARDL) bounds test procedure is utilized to understand short-run and long-run relationships between variables. The findings show that, in the long term, digital connectivity has a positive impact on economic growth, whereas public expenditure and openness to trade have a negative influence. Public expenditure negatively influences GDP in the short term, but openness to trade has ambivalent impacts depending on the lag structure. The diagnostic tests indicate that the model is stable and free from extreme econometric errors. The findings imply that Malaysia must prioritize efficient public expenditure, increase digital infrastructure, and implement complementary policies for trade openness to lead to long-run economic growth. The results have significant policy implications for the balance among fiscal, technical, and trade policies for promoting long-run growth.
References
Abdullah, M. A., R. (2017). The Impact of Government Expenditure on Economic Growth in Indonesia, Malaysia and Singapore. Journal of Economic Education, 11 - 18.
Ahmed, E. M., R. R. (2012). The Impact of ICT on East Asian Economic Growth: Panel Estimation Approach. J Knowl Econ, 541-555.
Badri, A. K., P. K. (2019). ICT and Human Development in Selected Developing Countries. International Journal of Social Sciences Perspectives, 5(2), 30-35.
Basuki, A. T., Y. P. (2019). The Role Of Local Government Expenditure On Economic Growth: A Review Of Panel Data In Indonesia. Humanities & Social Sciences Reviews, 7(5), 1293-1303.
Dao, M. Q. (2012). Government expenditure and growth in developing countries. Progress in Development Studies 12, 77-82.
Hasnul, A. G. (2015). The effects of government expenditure on economic growth: the case of Malaysia. Munich Personal RePEc Archive, 1-15.
Huchet-Bourdon, M., C. L. (2017). The relationship between trade openness and economic growth: Some new insights on the openness measurement issue. The World Economy, 1-18.
Idris, J., Z. Y. (2016). Trade Openness And Economic Growth: A Causality Test In Panel Perspective. International Journal of Business and Society, 17(2), 281-290.
IMF. (2025). International Monetary Fund. Retrieved from IMF Data: https://data.imf.org/en/Data%20Explorer?datasetUrn=IMF.RES:WEO(6.0.0)
Jahan, S., C. P. (2014). What Is Monetarism? IMF: Finance & Development, 38-39.
Jiranyakul, K. (2013, May 2). The Relation between Government Expenditures and Economic Growth in Thailand. Retrieved from SSRN: https://dx.doi.org/10.2139/ssrn.2260035
Kamsin, K., J. A. (2020). Trade Openness And Economic Growth In Malaysia From 1980-2018. Advanced International Journal Of Banking, Accounting And Finance (AIJBAF), 2(5), 55-63.
Karras, G. (2003). Trade Openness And Economic Growth Can We Estimate The Precise Effect? Applied Econometrics and International Development, 3(1), 7-25.
Keho, Y. (2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire. Cogent Economics & Finance, 1-14.
Korkmaz, S., H. G. (2021). The Relationship Between Government Expenditures, Economic Growth and Inflation In OECD Countries. Research of Financial Economic and Social Studies, 6(3), 490-498.
Kuyoro S. O., A. O. (2012). ICT: An Effective Tool in Human Development. International Journal of Humanities and Social Science, 2(7), 157-162.
Le, M. P., T. M. (2021). Government Education Expenditure and Economic Growth Nexus: Empirical Evidence from Vietnam. Journal of Asian Finance, Economics and Business, 8(7), 0413–0421.
Lucas, R E., J. (1988). On The Mechanics Of Economic Development. Journal of Monetary Economics, 3-42.
Majeed, M. T., T. A. (2018). Information and communication technology (ICT) and economic growth nexus: A comparative global analysis. Pakistan Journal of Commerce and Social Sciences (PJCSS), 12(2), 443-476.
Makun, K. (2017). Trade Openness and Economic Growth in Malaysia: Some Time-series Analysis. Foreign Trade Review, 157–170.
Mandala, R. A. (2020). Inflation, Government Expenditure, And Economic Growth In Indonesia. Jambura Equilibrium Journal, 2(2), 109-118.
M.Vu, K. (2011). ICT as a source of economic growth in the information age: Empirical evidence from the 1996–2005 period. Telecommunications Policy, 357-372.
Nasab, E. H., M. A. (2009). The Effect of ICT on Economic Growth: Further Evidence. International Bulletin of Business Administration, 46-56.
Nguyen, M. T., T. N. (2021). Trade Openness and Economic Growth: A Study on Asean-6. economies, 1-15.
Nguyen, H. T. (2022). Economic Growth and Government Expenditure in ASEAN Countries: A Threshold Approach. International Journal of Current Science Research and Review, 5(5), 1637-1645.
Niebel, T. (2018). ICT and economic growth – Comparing developing, emerging and developed countries. World Development, 197–211.
Nordin, N., N. N. (2024). The Role of Government Expenditure in Shaping ASEAN Economic Growth: A Panel Autoregressive Distributed Lag Approach. International Journal of Advanced Research in Economics and Finance, 6(3), 167-178.
Nordin, N., N. N. (2025). The Role of Government Development Expenditure on Economic Growth: Lessons from Selected ASEAN Countries for Malaysia. Journal of Management & Muamalah, 15(1), 1-19.
Othman, N., N. I. (2024). Assessing the Role of Government Spending in Education and Economic Growth in Malaysia. Advances in Social Sciences Research Journal, 11(2.2), 537-550.
Pesaran, M. H. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.
Sau-Rong, J., N. N.-R. (2020). Information And Communication Technology (ICT) And Economic Growth In Malaysia. International Journal Of Academic Research In Business And Social Sciences, 219-228.
Sinha, D. (1998). Government Expenditure and Economic Growth in Malaysia. Journal Of Economic Development, 23(2), 71-80.
Stanley, T. D., H. D. (2018). Does ICT Generate Economic Growth? A Meta-Regression Analysis. Journal of Economic Surveys, 32(3), 705–726.
Vgerou, C. A. (2003). The Link Between ICT and Economic Growth In The Discourse Of Development. Organizational Information Systems in the Context of Globalization, 373-386.
Vu, K., P. H., B. E. (2020). ICT as a driver of economic growth: A survey of the literature and directions for future research. Telecommunications Policy, 1-20.
WDI. (2025). Data Bank. Retrieved from World Bank Group: https://databank.worldbank.org/source/world-development-indicators
Wong, H. C., A. A. (2016). Public Expenditure and Economic Growth in Malaysia. International Conference on Accounting Studies (ICAS) (pp. 226-231). Langkawi, Kedah: Universiti Utara Malaysia.
Yanikkaya, H. (2002). Trade openness and economic growth: a cross-country empirical investigation. Journal of Development Economics, 57– 89.
Zhou, A. (2022). Digital infrastructure and economic growth—Evidence for China. Journal of Infrastructure, Policy and Development, 6(1), 1-13.
Zulkofli, A. Z., Nasiruddin, K., & Ismail, F. R. (2018). Government Expenditure On Education And Healthcare To The Effect On Gdp Value: A Case Of Malaysia. International Journal of Accounting & Business Management, 6(1), 95–112. https://doi.org/10.24924/ijabm/2018.04/v6.iss1/95.112.
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Muhammad Taufik Jefri , Lim Chee Ann, Siti Rahyla Rahmat
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
