Export orientation vs import substitution: which strategy should the government adopt? Evidence from Malaysia

Puteri Nurhaliq and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: Many previous empirical studies focused mainly on the effect of export expansion while ignoring the potential contribution of import substitution in developing economic growth especially for the case of emerging countries. This paper attempts to investigate the relationship between trade and economic growth emphasising the role of import and export in Malaysia over the period 1970 to 2014. The study treats the impact of export and import separately to allow the possibility of asym-metric influences on economic growth by adopting recent time series modelling. The study used Granger Causality test and Variance Decomposition (VDC) method to analyse the influences of trade improvement on growth development. This is important in providing evidence whether growth is driven mainly by trade activities or whether there is a reciprocal impact between trade and growth. The result confirms the existence of bidirectional long run relationship between growth and export and between growth and import, suggesting that singular focus on export from previous study tends to be misleading. This is crucial from the policy point of view in developing strategies to enhance growth. If export drives the economic growth, policy should be directed more towards export orientation and likewise for import.

Keywords: Export orientation; import substitution; Malaysia (search for similar items in EconPapers)
JEL-codes: C22 C58 F13 (search for similar items in EconPapers)
Date: 2016-06-15
New Economics Papers: this item is included in nep-int and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/82113/1/MPRA_paper_82113.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:82113

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().