The Relationship among Export, Import, Capital Formation and Economic Growth in Malaysia

Abstract

This study examine about the empirical question whether there is dynamic relationship among economic growth, export and import. Meanwhile, the objective of this study is to examine dynamic relationship among export- import and domestic investment. This study used time series data from 1967-2010 and VAR analysis. For the cointegration test we found no long run relationship among the interested variables. For causality analysis, export ratio and economic growth granger cause domestic investment. The impulse response function show that, the economic growth responds both positive and negative way depending on time period, due to the shock of domestic investment, import and export. Meanwhile because Malaysia is an open economy, to ensure effectively utilization of domestic resources, reforms of new policies to ensure that, at least two variables either import, export or domestic investment re enforce each other in promoting economic growth over long run is needed.

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