The Dynamic Impact of Imports, Exports, and Capital Formation on GDP in Malaysia Using VECM Approach | [Pakistan Journal of Life and Social Sciences • 2025]

Author(s):

1. Zhang Jiangxia: Sultan Idris Education University,Perak,Malaysia

2. Norimah Rambeli: Sultan Idris Education University,Perak,Malaysia

3. Asmawi Hashim: Sultan Idris Education University,Perak,Malaysia

4. Norasibah Abdul Jalil: Sultan Idris Education University,Perak,Malaysia

5. Emilda Hashim: Sultan Idris Education University,Perak,Malaysia

6. Laximee Abimannan: Sultan Idris Education University,Perak,Malaysia

7. Keerthana Balan: Sultan Idris Education University,Perak,Malaysia

8. Norimah Rambeli: Sultan Idris Education University,Perak,Malaysia

Abstract:

This research aims to analyze the relationship between imports, exports, capital formation, and GDP in Malaysia uing monthly time series data from 2015 to 2023. Based on ADF unit root test and Johansen Juselius cointegration test, this study confirms that there is a long-term stable cointegration relationship between the variables. The Granger causality test results show that there is a bidirectional causal relationship between imports and GDP, while GDP has a unidirectional causal relationship with capital formation. However, no significant Granger causality relationship was found between exports and GDP. In addition, by constructing a Vector Error Correction Model (VECM), the short-term dynamics and long-term equilibrium relationships between variables were further analyzed. Research has found that the error correction term has a significant negative impact on changes in GDP, indicating the existence of an auto correction mechanism in the system to maintain long-term equilibrium. These findings highlight the important role of imports in driving economic growth, not only by reflecting domestic demand but also by bringing in foreign technology and capital goods. Policymakers should consider the productive role of imports when designing strategies to enhance Malaysia’s economic development.

Page(s): 9200-9211

DOI: 10.57239/PJLSS-2025-23.1.00722

Published: Journal: Pakistan Journal of Life and Social Sciences, Volume: 23, Issue: 1, Year: 2025

Keywords:

Imports Exports Capital Formation VECM , Malaysias GDP

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