Exports, Imports and Economic Growth in Malaysia: EmpiricalEvidence Based on Multivariate Time Series

Abstract

This paper examines the relationship between export growth and income growth by including imports in the system of equations using the Johansen (1988) procedure and vector-error correction (VEC) model.Real exports were disaggregated into manufacturing and agricultural exports.The results of the multivariate cointegration indicate the presence of a stationary long-run relationship between exports, imports and GDP.The estimated VEC models suggest economic growth is driven by exports.Test results also confirm that economic growth causes export growth for manufacturing exports.Indeed, we found a feedback causal relationship between exports and economic growth for both the manufacturing and agricultural exports.The empirical findings indicate that an important determinant of long-run growth in the fast growing Malaysian economy is imports of foreign technology.

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