On The Relationship between Export and Economic Growth - A Look at Malaysian Experience

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Date
2006
Authors
Tuan Lonik, Ku 'Azam
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Abstract
Export led-growth theory identifies export growth as a major source of economic growth. The theory have received some considerable attention over the decades with vast amount of literature were devoted to analyse its empirical relationship. Some attempt has also been made to analysis the relationship between export growth and economic growth in Malaysia (Khalafalla and Webb, 2000 and Reinhardt, 2000). Undoubtedly, Malaysian export has grown substantially over the period of 1960 until recently. In nominalterm, export grew from RM3,208 million in l96l to RM544,956 millin in2004. On the other hand, GNP has also grew from RM6,681 million in 1961 to RM 425,060 million in 2004. A striking feature of this relationship is that from 1998 until 2004,the volume of Malaysian exports exceeds the GNP for that period. As a percentage of GNP, export was l28oh in2004. In the decade of 1960s and 1970s, Malaysian emphasised more on the import substitution strategy. By early 1980s, the drive for industrialisation was intensified. With this new development, the composition of Malaysian export also changed significantly. In the 1970-71and 1980-1981 period, primary commodities constituted 56.8% and 52.3o/o of total expofts respectively compared to 4.8o/o and l7.l% respectively for manufacturing output. By 1992-1993, this has changed dramatically to 62.9%" manufacturing and 17.6% primary exports. The study will seek to establish the export led growth hypothesis in Malaysia for the period 1,978 until 2002. Employing Pesaran, Shin and Smith (1986) ARDL cointegration technique to established the relationship between export and economic growth we discovered that the hypothesis hold for Malaysia for the period 1978 - 2002.
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Social sciences
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