How Stable is the Savings-led Growth Hypothesis in Malaysia? The Bootstrap Simulation and Recursive Causality Tests

The purpose of this study is to empirically investigate the vindication of the savings-led growth hypothesis for the Malaysian economy with the long-run TYDL version of the Granger causality test–Toda and Yamamoto (1995) and Dolado and Lütkepohl (1996). This study used the quarterly sample from 1970:Q1 to 2008:Q4. The recursive regression procedure will also incorporate into the TYDL causality test to measure the stability of the savings-led growth hypothesis in the long-run. Our empirical results support that the savings-led growth hypothesis is a long-run phenomenon and stable over time. Therefore, the Malaysian dataset supports the endogenous growth theory.JEL Classification: C22, E21, O16