THE FACTORS INFLUENCING MALAYSIA'S ELECTRICAL & ELECTRONICS (E&E) EXPORTS 1970 - 2010
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Date
2011-10
Authors
CHEONG, CHEE FOOK
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Abstract
The purpose of this study is to identify the determinants of Malaysia's Electrical &
Electronics (E&E) exports. Although literature on export determinants is bountiful, the
available research done on E&E exports per se seems to be lacking. Since E&E exports has
been and still is the pillar of growth for Malaysia's overall export growth, it only seems right
to dedicate a purposeful research on this sub-sector. Using time series data from 1970-2010,
the short run and long run relationships between the variables real effective exchange rate,
foreign direct investments and world GDP with E&E exports are tested using the Vector
Error Correction Model (VECM) and Johansen-Juselius cointegration test procedures
respectively. The data are also tested using the Granger Causality test based on VECM to
identify if these explanatory variables Granger cause E&E exports. The empirical results
reveal that both short-run and long-run relationships exist among the independent and
dependent variables with foreign direct investments and world GDP having a positive
relationship with E&E exports while real effective exchange rate showed an inverse
relationship with E&E exports. In fact, the results show that the effect of real effective
exchange rate on E&E exports is very significant. Although this study focuses on a sub-sector
of total exports, the findings are consistent with previous literature on the determinants of
exports.
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Keywords
FACTORS INFLUENCING , ELECTRICAL & ELECTRONICS