FACULTY OF BUSINESS, ECONOMICS AND ACCOUNTANCY

UNIVERSITI MALAYSIA SABAH

MACROECONOMICS 1
(BT11703)
SEMESTER 2, 2019/2020

INDIVIDUAL ASSIGNMENT

PREPARED FOR:
DR. RAFIQ IDRIS
Hereby, we declare that the work contained in this
assignment is our own, except where acknowledgement of
sources is made.

PREPARED BY:
No. Name Matric No.
1 NORFAHANA BINTI JEMAT BB19110421

SUBMISSION DATE:
14 AUGUST 2020
 ARTICLE 1:
This article is about the studies that investigate the relationship between the FDI
inflows and economic growth. Based on the studies have shown that there are a
positive relationships between the FDI inflows and economic growth especially in
developing countries. But, at the same time most studies have relied on the
conventional GDP measure to reflect economic performance, while it has been well
established that the conventional GDP indicator fails to measure true economic
progress. There are a few weakness that we can found in the GDP and one of it is its
inability to provide a sense whether an economy is moving on the sustainability path.
So, there are one alternative that could be as the GDP conventional called Genuine
Saving (GS) measure. Essentially, GS defines the sustainability conditions for a
resource dependent economy on the ability to maintain a constant stream of
consumption into the infinite future. While the importance of the relationships
between greater foreign direct investment (FDI) and GDP growth has received
considerable theoretical and empirical support, in recent years, an important
dimension that emerges in the FDI-GDP growth literature has been the role of
general economic development in inter-mediating the impact of FDI on economic
growth.
Malaysia’s growth, sustainability performance and FDI inflows indicates quite
well that Malaysia's economy has been operating on the sustainability track. Next,
theoretical framework. The neoclassical economic growth and endogenous growth
models provide the basis for most of the empirical work on the FDI-growth
relationship. Fundamentally, these models emanate from the standard Solow growth
model which suggests that GDP is a function of the nation’s stocks of capital and
labor and other factors which may affect the productivity of these inputs such as
financial development.
In my opinion, FDI may affect growth positively. This is because FDI moves in
general from capital-rich countries to capital-scarce economies, lower rental rate of
capital and increase production via enhancing labor productivity and introducing new
technology embedded in the capital. Human capital and financial markets interact
with FDI and, thus, are important for both short- and long-term growth processes.
FDI is an important medium to transfer technology, contributing relatively more
to growth than domestic investment. In addition, FDI has the effect of increasing
total investment in the economy more than one for one, which suggests the
predominance of complementarity effects with domestic firms.
 ARTICLE 2:
The article is about The Economic Impact of the COVID-19 Outbreak on
Developing Asia. Covid-19 is a new coronavirus disease that was first identified in
Wuhan, People’s Republic of China (PRC), in early January 2020. Economy will be
affected in many way. Firstly, there are several channels through which the COVID-
19 outbreak will affect economic activity in the PRC, the rest of developing Asia, and
the world. These include a sharp but temporary decline in domestic consumption in
the PRC and other outbreak-affected economies, and possibly investment. Secondly,
consumption in the PRC will experience a sharp, temporary drop, as occurred during
the 2003 SARS outbreak. Perhaps the most important channel through which
economic activity is affected is through a sharp but temporary decline in domestic
consumption in the PRC resulting from behavioral and/or policy changes such as
people staying home as a precaution, or because they are told to. Thirdly, Another
important channel through which economies will be affected is tourism and business
travel, in the PRC and other
economies. Forth, Tourism arrivals and receipts in many developing Asian economies
are expected to decline sharply, as a result of numerous travel bans as well as
precautionary behavior. One of the most significant travel bans is the one imposed
by the PRC itself. Next, the demand shocks can spill over to other sectors and
economies via trade and production linkages. The PRC is now the world’s second-
largest economy, and accounts for onethird of global growth. There are other
important channels, including supply-side disruptions and economiceffects through
health and health care. There have been substantial production disruptions as a
result of forced business closures and the inability of workers to get to work, as well
as disruptions to trade and business as a result of border closures, travel bans, and
other restrictions on the movement of goods, people, and capital.
In my opinion, the Covid-19 pandemic really give a big impact on the economy
of the country. In Malaysia there are several economy sector which affected due to
this pandemic. For example, tourism sector because of the restrictions on the influx
of foreign tourists and movement controls affecting domestic tourism activities. Next,
the domestic economic sectors are affected by the effects of the global supply chain.
So the recommendation on how to handle the bad impact of Covid-19 toward
economy are, facilitating cash flow to reducing business costs for companies that
affected by COVID-19 and assistance to affected individuals and stimulating demand
in the tourism industry.
ARTICLE 3:
This article is about the sectoral impact of fiscal policy in Malaysia. In Malaysia, fiscal
policy via government allocations for infrastructure development and investment is a
crucial tool in managing the economy. Consequently, the debt-to-gross domestic
product (GDP) ratio has also risen after these discretionary fiscal decisions. Indeed,
Malaysia has registered a fiscal deficit since the Asian financial crisis in 1997. A series
of economic turbulence has caused the fiscal deficits to be persistent.
Existing economic theories failed to offer a conclusion about the efficacy of fiscal
policy. Generally, they reported that a standard Keynesian model expects that
government spending will create an increase in the output at a size larger than the
spending. However, this size of the output’s responses could be influenced by other
factors, such as exchange rate regime and trade openness. Otherwise, the fiscal
policy is not important in the Ricardian equivalence theory because economic agents
will reduce their current consumption after an increase in government spending or a
reduction in taxation.
Generally, the impact from total government expenditure is detected in the
manufacturing, construction and agricultural sectors. Most of these statistically
significant reactions are positive, suggesting that government expenditure plays a
role in pushing the economy forward. This is in accordance with the hypothesis that
greater spending will increase the demand for output.
The relatively few statistically significant impacts from government expenditure
compared to government revenue is largely in accordance with the Ricardian
equivalent theory. This implies that it is possible that positive economy contributes to
higher demand for output and government revenues.The policy implication from this
study is that the Malaysian government should focus more on government revenue
in order to affect sectoral GDP through fiscal policy. Moreover, the mixtures of
different
reactions of sectoral output to government revenue and expenditure shocks imply
that any changes in fiscal policy that could negatively affect each GDP sector should
come
with different remedial programs for respective sectors.
In my opinion, fiscal policy affects the economy through several channels, with
varying time lags. In the short run, it can impact the level of activity in the economy
by changing aggregate demand for goods and services. This means that fiscal
policy can play a role in stabilizing economic fluctuations. So, fiscal policy is so
important since it is an important tool for managing the economy because of its
ability to affect the total amount of output produced that is, gross domestic product.
ARTICLE 4:
The article is about trade openness in Malaysia evidence from trade with ASEAN
and Australian countries. Malaysia’s WTO accession, active participation in regional
trading agreements, trade policy reform in agricultural and manufacturing sectors,
government reforms encouraging economic competitiveness and lower trade cost are
among the main reasons for explaining Malaysia trade performance and openness.
Apart from the role that trade openness has played in Malaysia’s economy, this
paper’s gravity model empirical regression results suggest that other factors such as
distance, per capita income in Malaysia and its trading partner and exchange rate
also explain significantly Malaysian trade performance with its regional counterparts,
namely the major ASEAN and Australasian countries. Malaysia has been a WTO
member since January 1995 . Malaysia has also pursued regional and bilateral free
trade agreements (FTAs) to complement the multilateral approach to trade
liberalisation. Malaysia’s involvement in FTAs began with the establishment of the
ASEAN Free Trade Area (AFTA) in 1993. Malaysia’s government has heavily
intervened in the manufacturing and agricultural markets by imposing various trade
policy regimes. The Malaysian government’s commitment to boosting the
competitiveness of all sectors in the economy can be seen in national policies
introduced since the 1960s. Policies prior to 1970s were introduced with the
objective to efficiently use natural resources, reducing dependence on raw material
exports and expanding domestic production to increase exports of manufactured
products .Trade costs are defined as including all costs involved in getting a product
to end user other than the marginal cost of producing the good itself.
In my opinion, openness is an indispensable enabler of growth, job creation, and
poverty reduction. Trade provides new market opportunities for domestic firms,
stronger productivity, and innovation through competition. It contributes to poverty
reduction, stronger wages, geopolitical benefits derived from deeper economic
integration, and even on the personal level that increased individual choice and
freedom.
No country has developed successfully in modern times without harnessing
economic openness to international trade, investment, and the movement of people.
This is especially relevant for smaller countries as rarely has any country with less
than 10 million people reached high income status with less than 50 percent of
exports in GDP.