European Journal of Economics, Finance and Administrative Sciences ISSN 1450-2275 Issue 24 (2010) © EuroJournals, Inc. 2010 http://www.eurojournals.com Determinant Factors of Economic Growth in Malaysia: Multivariate Cointegration and Causality Analysis Mori Kogid Corresponding Author School of Business and Economics Universiti Malaysia Sabah, Sabah, Malaysia E-mail: morikogid@gmail.com Tel: (+6088) 320000 Ext. 1627; Fax: (+6088) 320360 Dullah Mulok School of Business and Economics, Universiti Malaysia Sabah, Sabah, Malaysia Lim Fui Yee Beatrice School of Business and Economics, Universiti Malaysia Sabah, Sabah, Malaysia Kasim Mansur School of Business and Economics, Universiti Malaysia Sabah, Sabah, Malaysia Abstract This paper investigates the factors that stimulate and maintain economic growth. The determinant factors studied are consumption expenditure, government expenditure, export, exchange rate, and foreign direct investment in Malaysia from the year 1970 to 2007. This study uses cointegration analysis and the causality approach by Johansen and ECM to analyze the relationship between economic growth and the determinant factors. The results of this study show that there exists long-run cointegration and multiple short-run causal relationships between economic growth and the determinant factors. Overall, findings show that all the determinant factors (combined determinant factors) cause economic growth in the short-run. However, individual tests indicate that only consumption expenditure and export cause economic growth while this is not so for the government expenditure, exchange rate and foreign direct investment. The study concludes that consumption expenditure and export play important roles as determinant factors to economic growth, and government expenditure, exchange rate and foreign direct investment may have a role as a catalyst and complement determinant factors to economic growth in Malaysia. Keywords: Economic growth, Determinant factors, Cointegration, Causality, Malaysia 1. Introduction The paradigm shift in the economy from static to dynamic has sparked considerable attention from economists since the 90s. The idea is that economy is not static – economic structure can change (Galbraith, 1994). A change in the economy can affect the development of a country. For this reason, economic growth and the factors leading to growth has been a constant area of study. Traditional growth theory based on Solow (1956) and Denison (1962) as cited in Piazolo (1996) shows that setting the output depends on the level of capital stock, the volume of labour