Abstract
This study empirically examines the potential determinants of the wealth of Malaysian Employees Provident Fund (EPF). The auto-regressive distributed lag (ARDL) bounds test approach was employed to determine the existence of a long-run relationship between EPF’s wealth and its determinants, namely inflation rate (INF), gross domestic product (GDP), life expectancy (EXP), and the Gini coefficient (GINI) as a proxy for income inequality. Data for this study consisted of a set of annual time series data from 1980 to 2018. The findings indicate the existence of a long-run equilibrium relationship between the total EPF wealth and GDP, income inequality, INF, and EXP. Further, there is a relatively quick adjustment in the total EPF wealth when all of the determinants change. GDP, EXP, and GINI were found to be significantly important drivers of EPF wealth. A 10% change in GDP will result in a long-run change of 25.8% in the total EPF wealth. Meanwhile, a 1% increase in income inequality and life expectancy will reduce the total EPF wealth by 11.8% and 20.4%, respectively. One of the implications of this study’s findings is that EPF wealth would grow continuously with an increase in economic prosperity and improvements in income inequality and demographic structure. Thus, this study suggests that EPF wealth can be improved by making positive changes to economic and demographic factors in ensuring the sustainability of the fund.
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The authors are grateful for the financial support from the Faculty of Computer and Mathematical Science, Universiti Teknologi MARA, Shah Alam.
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Parly, H.S., Zahari, S.M., Rahim, M.A.A., Shariff, S.S.R. (2021). An Autoregressive Distributed Lag (ARDL) Analysis of the Relationships Between Employees Provident Fund’s Wealth and Its Determinants. In: Mohamed, A., Yap, B.W., Zain, J.M., Berry, M.W. (eds) Soft Computing in Data Science. SCDS 2021. Communications in Computer and Information Science, vol 1489. Springer, Singapore. https://doi.org/10.1007/978-981-16-7334-4_16
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