Muhammad Danial Ariff Burhanudin

Faculty of Business and Management,

Universiti Teknologi MARA, Selangor, Malaysia

Email: danialariff4152@gmail.com

Real effects of government debt on sustainable economic growth in Malaysia

Ruhaini Muda

Accounting Research Institute and Faculty of Business and Management, Universiti Teknologi MARA,

Selangor, Malaysia

Email: ruhaini@salam.uitm.edu.my

Siti Badariah Saiful Nathan

Faculty of Business and Management, Universiti Teknologi MARA, Selangor, Malaysia

Email: sitib879@salam.uitm.edu.my

Roshayani Arshad

Accounting Research Institute and Faculty of Accountancy,

University Teknologi MARA, Selangor, Malaysia

Email: roshayani@salam.uitm.edu.my 

Abstract. The persistent increase of government debt in Malaysia in the recent years has raised con-cerns as to whether the borrowings have spurred the economy or became a drag on econom-ic growth. The present paper investigates the real effect of government debt on sustainable economic growth in Malaysia using the Autoregressive Distributed Lag approach for the period of 1970-2015. The results show there are positive significant long- and short-run relationships between government debt and sustainable economic growth. There is also a unidirectional causality running from government debt to sustainable economic growth. The findings indicate that Malaysia’s government debt is an important macroeconomic element for sustainability of economic growth in Malaysia. There is no evidence, however, to con-clude that the level of government debt had any adverse impacts on sustainable economic growth.

Received: May, 2017

1st Revision: August, 2017

Accepted: October, 2017

DOI: 10.14254/2071-8330.2017/10-3/12

JEL Classification: E61, O4

Keywords: government debt, sustainable economic growth, Malaysia