Export Analysis of Major Commodities in Malaysia

Abstract

This study aims to investigate the factors associated with the commodity export demand and to explore and quantify the contribution of the commodity export to economic growth. The technique of (VECM) Vector Error Correction is applied to estimate the export and economic growth model. It tests whether there has been a long-run relationship between commodity export volume and exogenous variables such as own price, substitute price, exchange rate, world population and industrial production index. The results indicated that there is a long run relationship among variables. The result suggests that exchange rate have a negative impact to the palm oil, rubber and tin where depreciation may reduce export of these commodities. The findings of the research also show that the commodities export has mixed effect on economic growth in Malaysia. Export of petroleum, palm oil and sawlog has a positive and significant relationship with economic growth in the long run while only petroleum and palm oil contributed to the economic growth in the short run. The evidence of impulse response function shows that exchange rate and FDI shock have a relatively higher significant impact on all exports of major commodities and economic growth respectively. This study implies that export of major commodities in Malaysia should be treated as an engine of growth. The effective management of exchange rate and export promotion policies can play a significant role in increasing commodity exports thus will improve Malaysia economic growth.