Investigating the Causal Relationship between Export and Economic Growth: A Malaysian Perspective

Abstract

Export is perceived to be an important factor of economic growth in numerous countries irrespective of their economic status whether they are developing or developed. Economic growth is also regarded as a determinant of export in various countries. These two issues have attracted researchers to investigate the bidirectional relationship between export and economic growth. However, most of them found a unidirectional relationship. Therefore, this study attempts to prove the existence of a bidirectional relationships between export and economic growth in Malaysia. Annual data on export, GDP, employment and fixed capital formation were collected and analysed from 1984 to 2014. The Vector Autoregressive Model (VAR) was employed and the findings show that there is a bidirectional relationship between export and economic growth in Malaysia. Therefore, a rise in export can boost economic growth and vice versa.