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Export-led growth and structural change: evidence from Malaysia

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  • Khalid Yousif Khalafalla
  • Alan Webb

Abstract

Many studies have tried to establish the causal link between export expansion and economic growth. This contribution is to recognize that structural changes will change the sources of growth and this will affect the export-growth relationship. A country case study approach is used focusing on Malaysia, a country with one of the world's highest sustained growth rates and a long history of commodity trade. We use VAR analysis of Malaysian quarterly trade and GDP growth from 1965 to 1996. Trade data are disaggregated into primary and manufactures exports and causality tests are applied to the entire period as well as two subperiods #150 the 1965 #1501980 period when policy emphasis was on import substitution and the 1981#1501996 period when policies favoured export-led growth. Statistical tests confirm export-led growth for the full period and for the period to 1980 but tests on the 1981#1501996 period show growth causing exports. Primary exports had a stronger direct impact on economic growth than manufactures. The weakening support for export-led growth after Malaysia shifted to an export-oriented development strategy is associated with structural changes associated with industrialization. Interaction among trade and growth variables becomes more complex with a broadening export base and more diverse sources of growth.

Suggested Citation

  • Khalid Yousif Khalafalla & Alan Webb, 2001. "Export-led growth and structural change: evidence from Malaysia," Applied Economics, Taylor & Francis Journals, vol. 33(13), pages 1703-1715.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:13:p:1703-1715
    DOI: 10.1080/00036840010015066
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    References listed on IDEAS

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    1. Anne O. Krueger, 1978. "Foreign Trade Regimes and Economic Development: Liberalization Attempts and Consequences," NBER Books, National Bureau of Economic Research, Inc, number krue78-1.
    2. Jagdish N. Bhagwati, 1978. "Anatomy of Exchange Control Regimes," NBER Chapters, in: Foreign Trade Regimes and Economic Development: Anatomy and Consequences of Exchange Control Regimes, pages 7-52, National Bureau of Economic Research, Inc.
    3. Jagdish N. Bhagwati, 1978. "Foreign Trade Regimes and Economic Development: Anatomy and Consequences of Exchange Control Regimes," NBER Books, National Bureau of Economic Research, Inc, number bhag78-1.
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