A STUDY OF EXOGENEITY TESTS ON EXPORT-LED GROWTH HYPOTHESIS THE EMPIRICAL EVIDENCES ON POST-CRISIS EXCHANGE RATE REGIME IN MALAYSIA

Abstract

The focal point of this study is to examine the robustness of the export-led growth hypothesis in Malaysia after the Asian Financial Crisis in 1997/1998. This study adopts the Vector Error Correction Mechanism (VECM) to differentiate between short run and long run causal effects in examining the led growth determinants. By using the standard time series procedures, the result proposes for the bi-directional and/or uni-directional causality between exports and economic growth, both in the short-run and long-run. Moreover, this study found the evidence for the strong case of Export-Led Growth Hypothesis (ELGH) in Malaysia in post-crisis regime by employing the test procedure proposed by Darrat (2002). Hence, we conclude for the robustness cases of ELGH in post-crisis exchange rate regime in Malaysia, is successfully documented.