Determinants of Export: Empirical Study in Malaysia

Abstract

This research aims to study the relationship of export with four determinants, namely import, inflation, foreign direct investment (FDI), and exchange rate.Sample years are 1975 to 2013.Ordinary least square (OLS) is used.Results revealed that import has positive relationship with export.This implied that Malaysia import may be an "assembly point exporter".Electric and electrical (E&E), which is Malaysia major export component has high possibly where inputs are imported, then assembly and exported.Foreign exchange rate (domestic currency in term of foreign) has positive relationship with export, thus validating Marshall Learner hypothesis.Inflation has negative relationship as higher aggregate price increase cost of production and decreasing price competitiveness of export.Foreign direct investment has an inverted-U curve relationship, which give further insight into conflicting evidence of linear relationship between export and FDI.Facilities provided to promote export may attract inflow of foreign investment.However, if FDI is targeted to produce for domestic market, it may not contribute to export growth.

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