Financial development, foreign investment and economic growth in Malaysia

► The empirical analysis based on annual data for the period 1970-2007 reveals that the level of financial development has contributed to the growth of domestic capital stock in Malaysia but its impact on economic growth is statistically insignificant. ► An increase in the stock of foreign investment in Malaysia has contributed to an increase in the stock of domestic capital and economic growth. ► The stock of foreign investment in Malaysia is significantly affected by the level of openness of the economy and the exchange rate.