EXPORTS, IMPORTS AND ECONOMIC DEVELOPMENT IN SABAH: NEW EMPIRICAL EVIDENCE

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Fumitaka Furuoka
Qaiser Munir

Abstract

International Trade is considered as the “engine” for the economic development in many developing countries. This paper empirically examines relationship between international trade (i.e. export and import) and economic development in Sabah, Malaysia. Though international trade has been an important pillar of Sabah’s economy, systematic empirical analysis of the impact of international trade on the state’s economic performance seems to be lacking. There are three main empirical findings from this study. Firstly, the Johansen cointegration tests indicate that there is existence of equilibrium relationship between international trade and economic development in Sabah state. Secondly, the Granger causality tests indicate that there is also causality between trades and development in Sabah. Thirdly, the results from impulse response functions imply that Sabah’s economic development has been driven by international trade (i.e. exports and imports). The findings from the variance decomposition indicate that exports are more crucial for the economic development in the state.


Keywords: International trade, economic development, exports, causality, Sabah


 

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