Effect of macroeconomic variables on performance of agriculture firms
The impacts of macroeconomic variables over the years have gained the attention of not only scholars but also policy makers around the world. This is because the effect of macroeconomic variables increases the uncertainty over the time which makes it more difficult for international trade and inv...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English |
| Published: |
2017
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/68493/1/FEP%202018%206%20IR.pdf |
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| Summary: | The impacts of macroeconomic variables over the years have gained the attention of
not only scholars but also policy makers around the world. This is because the effect
of macroeconomic variables increases the uncertainty over the time which makes it
more difficult for international trade and investment decision, and financial
performance as well. This study examines the effect of macroeconomic variables on
agriculture firms in Malaysia by using system-GMM dynamic panel techniques and
GARCH (1, 1) for the period of 2001 and 2015.
The findings from GARCH (1,1) confirmed the volatility of Malaysian Ringgit;
where the volatility follows over similar trend. The analysis result of system-GMM
of dynamic panel data shows Malaysian Ringgit has a positive impact on the
financial performance of agriculture firms in Malaysia and the results are in line with
our hypothesis. On the other hand, macroeconomic variables of the study i.e Money
Supply (MS), Interest Rate (IR), Gross Domestic Products (GDP) and Consumer
Price Index (CPI) show mixed results in relation with the financial performance of
Agriculture companies in Malaysia. All the macroeconomic variables seem to have a
positive and significant relationship with ROA except for Consumer Price Index
(CPI) and Interest Rate (IR). While CPI is the only variable this shows a negative
association with ROE. On the other hand, for the farm level variables, namely,
ARME and AVA show a positive impact on financial performance.
This study contributes to the existing literature of the exchange rate volatility by
looking at its effect precisely on agriculture businesses in Malaysia. Using system-
GMM methods give novelty to the study. For the market players, Malaysian
Agricultural farms can predict the possible movement of exchange rate; so that they can develop business policy to enhance financial performances. Also, farm level
variables can help them to reconsider their business strategy to boost up business.
Further, for government and policy makers study results provide a comprehensive
insight on the co-movement of exchange rate with specified macro variables.
Understanding such dynamics enables the government to predict substantially the
trend and impact so that they may come up with preventive measures rather than
wait and see what will happen. It is important to control the volatility on the
exchange rate that is expected to attract foreign capital inflows. Moreover, this
encourages local investors to boost aggregate investment, thus increases income,
consumption and overall economy of the country. |
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