Assessing the link between trade openness and output growth in Malaysia: An econometric assessment

Abstract

Trade openness in the sense of trade liberalization policies seems to be no guarantees of output growth since the previous studies shows the relationship of the trade openness and output growth may vary across developed countries and developing countries. Therefore, the primary concern of this study is to examine the relationship between trade openness and total output growth in the case of Malaysia (as one of the developing countries and emerging economies). In order to gain initial insight toward the relationship between trade openness and output growth Pearson Correlation was employed. While, the impact of trade openness toward output growth was estimated by using Ordinary Least Square Regression. In addition, the empirical work had extended towards Granger Causality Test to have a meaningful research study. This is due to some of the economist which saying that correlation is meaningless test without doing causation test. The empirical result derived provides evidence that Malaysia was not suffered from the trade openness since there is a positive relationship between trade openness and output growth. Thus, this study argues that developing country also can gain benefit from trade openness.