The objective of this paper is to test the validity of the Export-led Growth Hypothesis (ELGH) in the Malaysian economy. Malaysia has always been considered to have attained its growth primarily through exports (Okposin, Bassey, Hamid, Halim, and Boon, 1999; Mun, 2008; Mahathir, 1990). In the past, several studies on this topic have been conducted but their analyses were limited to relationships using Bound-testing, Autoregressive –Distributed Lag (ARDL) and the Toda Yamamoto analysis. Empirical data and analysis in our paper cover a 21 – year span and quarterly time-series data (1991:Q1 – 2012:Q4) are used to test this ELG hypothesis. Also, many dynamic econometric measures including the Augmented Dickey Fuller (ADF) and Phillip – Perron (PP) unit root tests, Cointegration test as well as the Vector Error Correction model (VEC) for the long run have been applied. Based on these generic models, both real exports and capital stock (productivity) are found to have stimulated positive adjustments to economic growth in the long run whereas real exchange rate is found to have influenced economic growth negatively. Overall, our conclusion is that the ELG hypothesis seems applicable to Malaysia in the long run.
Export-Led Growth Hypothesis in Developing Countries: Econometric Evidence from Bangladesh
