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Does international trade lead industrial production or the other way around ? evidence from Malaysia

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  • Ikram, Ahmad
  • Masih, Mansur

Abstract

The focus of the paper is to discover a relationship between industrial production and international trade. This study is important as the result will help the policymakers draw the appropriate policies that affect these two aspects of the economy. The standard time series techniques are employed and Malaysia is used as a case study. We have reviewed a number of studies that analyze some other open East Asian countries such as, South Korea and Taiwan and we found that the relationship between the two variables in those countries is unidirectional from trade to industrial production, in the sense that trade openness tends to increase industrial production through technological transfer. In the case of Malaysia as well, the key empirical finding of this study is that international trade is driving the industrial production like many other East Asian open economies. The results are plausible and contain strong policy implications.

Suggested Citation

  • Ikram, Ahmad & Masih, Mansur, 2018. "Does international trade lead industrial production or the other way around ? evidence from Malaysia," MPRA Paper 111210, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:111210
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    References listed on IDEAS

    as
    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. Ehsan U. Choudhri & Dalia S. Hakura, 2000. "International Trade and Productivity Growth: Exploring the Sectoral Effects for Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 1-2.
    3. M. Hashem Pesaran & Yongcheol Shin, 2002. "Long-Run Structural Modelling," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 49-87.
    4. Mansur Masih & Ali Al-Elg & Haider Madani, 2009. "Causality between financial development and economic growth: an application of vector error correction and variance decomposition methods to Saudi Arabia," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1691-1699.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    industrial production; trade balance; productivity; economic growth; Malaysia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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