Impact of Malaysian export to RCEP countries : A Quantile Regression Study

Md. Mahbubur, Rahman and Dayang Affizzah, Awang Marikan (2023) Impact of Malaysian export to RCEP countries : A Quantile Regression Study. In: BORNEO BUSINESS RESEARCH CONFERENCE (BRRC 2023), 23 August 2023, Raia Hotel Convention Centre, Kuching.

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Abstract

International trade plays a vital role in enhancing the economic growth and development of a country which acts as a mechanism to bound different countries together in a trade bloc. It is thus important to understand the performance of the countries while acknowledging the determinants for the trade flow of the pact. This paper employs a quantile regression approach to test the effects of export led growth on economic growth at the different conditional economic growth distribution from 2000 to 2020 in Malaysia. The key finding of this study is that Openness of Malaysia is found to be insignificant throughout the quantiles which signifies that through this sample period, Trade Share of Malaysia has no effect on the country’s distribution of export towards the RCEP countries. On the other hand, GDP of Malaysia, GDP of other RCEP countries and Trade Share of RCEP members tend to affect export of Malaysia which is understandable. Empirically, an additional 1 percent of country j’s (RCEP) GDP will significantly increase export distribution of Malaysia in the range of 1.12 percent to 0.60 percent. However, the significance declines throughout the quantiles from 0.59percent at quantile 0.30 to 0.60 percent at .90 quantile and at .70 (higher quantiles) it increases from 0.78. The significance of country i’s GDP (Malaysia) grow stronger throughout the quantiles. The effect of GDP of country i to Malaysia’s export distribution are between the ranges of 1.84 percent to 1.22 percent. Despite being positively related to the export distribution, the significance is getting greater from median to higher quantiles. This means that an increase in GDP of country i(Malaysia) for 1 percent will cause an increase in export of about 1.22 percent at quantile 0.90. As for Trade Share of country j (RCEP Countries), it aligns with the traditional trade theory, which is statistically significant with positive coefficient. An increase of 1 percent openness of country j`s there is a 0.28 percent increase of export of country I (Malaysia). Trade Share of country j (RCEP countries) is found to be less significant at higher distribution of export of 1.27 percent at quantile 0.10 in relation to 0.0021 percent at quantile 0.90. For robustness, this study further provides comprehensive analysis on the degree of income and trade convergence and factors affecting trade flow of Malaysia developed by Phillip and Sul (2007). The empirical findings discover the absence of a homogeneous convergence clubs. Three converging group, one outlier and three diverging group are detected in terms of Export while GDP Per Capita conveyed similar pattern which are four converging groups with an addition of diverging group. Which implies that the RCEP members experience weak convergence between them which illustrate relatively substantial dissimilarity in its structure of the economy as a whole. Despite the dissimilarity, the speed of convergence indicates that possible catching up within the members countries, in converging towards a similar transition path of economics growth. Thus, indicating further realization of economic corporation and stronger integration among the RCEP members now and in the future. On the other hand, Trade Share convergence displays slight difference from export convergence, two converging group and one diverging group pattern. Interestingly from Quantile Regression analysis, Openness of Malaysia is found to be insignificant throughout the quantiles which signifies that through this sample period, Trade Share of Malaysia has no effect on the country’s distribution of export towards the RCEP countries. On the other hand, GDP of Malaysia, GDP of other RCEP countries and Trade Share of RCEP members tend to affect export of Malaysia.

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