The determinants of health expenditure in Malaysia: A time series analysis

The purpose of this study is to investigate the determinants of health expenditure in Malaysia within the time series framework from 1967 to 2007. This study employed the Johansen-Juselius cointegration test to examine the cointegration relationship. The results showed that health expenditure and its determinants are cointegrated. Consistent with economic theory, the TYDL and variance decomposition analysis reveals that the key explanatory variables in Malaysia’s health expenditure model are income, health care price and the proportion of population aged more than 65 years old. Moreover, the TYDL causality indicates that health expenditure and income is bi-directional in nature, thus policies initiative to promote health expenditure should be implemented to achieve sustainable economic growth and development.