Energy conversion, innovation, and real economic output in Malaysia: Evidence from time-series analysis

Understanding the macroeconomic drivers of long-run economic development remains an important policy challenge for Malaysia's ongoing energy transition and innovation agenda. Although previous studies have examined individual relationships among renewable energy (REC), foreign direct investment (FDI), financial development (FD), and innovation (INN), limited evidence jointly evaluates these factors alongside domestic investment within a unified ARDL framework while accounting for structural breaks and conducting extensive robustness analyses. This study addresses that gap by investigating the long-run and short-run relationships between real gross domestic product (GDP), FD, FDI, REC, INN, and gross fixed capital formation (GFCF) in Malaysia. Annual data for the effective matched sample 1990–2023 were obtained from the World Bank, UNCTAD, WIPO, and related international databases. The autoregressive distributed lag (ARDL) bounds testing approach was employed to estimate long-run equilibrium relationships and short-run adjustment dynamics, complemented by structural break tests, diagnostic tests, robustness analysis, and Toda–Yamamoto predictive Granger causality tests. The results reveal a stable long-run cointegrating relationship among the variables. FD, INN, FDI, and domestic investment exhibit positive and statistically significant long-run associations with Malaysia's real GDP, while REC contributes positively with a comparatively smaller long-run elasticity. The error-correction term confirms convergence toward long-run equilibrium following short-run deviations, and robustness analyses indicate that the principal findings remain stable after accounting for structural breaks and alternative model specifications. These findings contribute to the literature by providing an updated and reproducible long-run assessment of Malaysia's real economic output using a consistent ARDL framework, structural break diagnostics, and comprehensive robustness check. The study provides policy evidence supporting financial deepening, INN capacity, REC investment, and productive capital formation as complementary components of Malaysia's long-run economic development strategy.