ANALYZING THE RELATIONSHIP BETWEEN MACROECONOMIC INDICATORS AND THE INCIDENCE OF FINANCIAL SCAMS IN MALAYSIA

Abstract

This study examines the relationship between key macroeconomic indicators—unemployment rate, inflation rate, and household debt level—and the incidence of financial scams in Malaysia from 2010 to 2021. The objective is to determine how fluctuations in these economic variables affect the occurrence of financial fraud, providing insights into the socio-economic factors that may drive scam activities. The data for financial scams was obtained from the Malaysian Royal Police, while the macroeconomic indicators were sourced from the Department of Statistics Malaysia. Ordinary Least Squares (OLS) regression was employed to analyze the data, focusing on how each variable influences scam incidents. The findings reveal that the unemployment rate has a statistically significant positive impact on the number of scam cases, suggesting that rising unemployment contributes to an increase in financial fraud. Specifically, for each one-unit increase in the unemployment rate, approximately 4.125 more scam cases are observed. In contrast, inflation and household debt levels do not show statistically significant effects on the prevalence of financial scams. The model explains 60.6% of the variability in scam cases, highlighting unemployment as a critical factor influencing financial fraud. These findings underscore the need for policymakers to focus on addressing unemployment as part of broader strategies to combat financial scams and mitigate the socio-economic vulnerabilities that facilitate fraud, especially during periods of economic instability