The impact of selected macroeconomic variable toward the inflation in Malaysia from the year 1985 until 2018 / Muhamad Firdaus Mohd Jol

This study examines the relationship between macroeconomic variables and inflation
rate in Malaysia from the period year of 1985 to 2018, which consisted of annually
data in the total of 34 observations. Time series econometrics was used to capture the
effect of macroeconomic variables toward inflation rate in Malaysia. Moreover, this
study also examines the long run, short run, stability, normality, and specification
errors of the empirical model.
Macroeconomic determinants such as foreign direct investment (FDI), Exchange Rate
(ER), Unemployment Rate (UR), Agriculture (AGR) and Government spending are
selected in this study. The empirical results concluded that only three from the five of
the determinants above are significant towards inflation rate in Malaysia which is
foreign direct investment (FDI), exchange rate (ER) and agriculture (AGR) is
significant with positive relationship while unemployment rate (ER) and government
spending (GS) is not significant with negative relationship. Therefore, Malaysia’s
government should strive for an economy growth rate that is stable and consistent
with the growth rate of inflation, rather than beating inflation first to strike for a faster
growth.