Exports and productivity: error correction and cointegration evidence for Malaysia

Abstract

This paper re-examines the relationship between productivity and exports in the case of Malaysian manufacturing industries for the period of 1980-1999. Using 63 manufacturing industries data in Malaysia, I investigate whether productivity and exports are cointegrated. Further, I estimate error correction models to investigate whether export intensity is contributing to productivity of these industries in the short run. Error correction models show that there are disequilibrium in the short run but it tends to be corrected in the long run. Kao (1999) and Pedroni (1999) tests proved that productivity and exports are cointegrated ie. they have long run equilibrium. This study proves that there is a short run and long run relationship between productivity and exports of the manufacturing industries in Malaysia.