Are Malaysian exports and imports cointegrated?

Abstract

This paper investigates the long-run relationship between Malaysian exports and imports. Towards this end, multivariate cointegration techniques have been applied. For all measures (or cases), both the unrestricted and restricted cointegration results demonstrate that there exists a long-run relationship between Malaysian exports and imports. Simply put, both the variables will converge towards equilibrium in the long run which indicates the effectiveness of Malaysia?s long-term macroeconomic planning in stabilising trade balance. Thus, the Malaysian economy does not violate its inter-temporal budget constraint.

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