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Trade Sustainability in the Forestry Domain: Evidence from Malaysia using Johansen and Bound Test Method

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  • Emmy, F.A.
  • Baharom, A.H.
  • Alias, Radam
  • Mohd Rusli, Yacob

Abstract

This study was undertaken to explore the relationship between export and import, in the category of Forestry domain for Malaysia, which includes sub domain (1) industrial roundwood;(2) wood pulp; (3) wood fuel; (4) paper and paper board; (5) sawn wood; (6) recovered paper and (7) wood base panel. To test the robustness, Johansen (1991) cointegration method and ARDL approach were employed and the period of the study covers annual data from 1961 to 2007. The results clearly show that the export and import of forestry domain is highly cointegrated. This shows trade is indeed sustainable in the domain of forestry and a sign of good trade policies adapted and implemented by the relevant authorities Bi-directional granger causality could also be detected based on VECM (vector-error correction model) method. Imports seem to positively and significantly affect exports, both in the long run and short run, vice versa. The results are robust when we employed the Bounds test as well.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17487.

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Date of creation: 17 Sep 2009
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Handle: RePEc:pra:mprapa:17487

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Keywords: Johansen cointegration test; forestry trade; VECM; ARDL;

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  1. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
  2. Fountas Stilianos & Wu Jyh-Lin, 1999. "Are the U.S. Current Account Deficits Really Sustainable?," International Economic Journal, Taylor & Francis Journals, vol. 13(3), pages 51-58.
  3. Ahmad Zubaidi Baharumshah & Evan Lau, 2002. "On the Sustainability of Current Account Deficits: Evidence from Four ASEAN Countries," Working Papers 0062, National University of Ireland Galway, Department of Economics, revised 2002.
  4. Mohsen Bahmani-Oskooee & Hyun-Jae Rhee, 1997. "Are Imports and Exports of Korea Cointegrated?," International Economic Journal, Taylor & Francis Journals, vol. 11(1), pages 109-114.
  5. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  6. Manuchehr Irandoust & Johan Ericsson, 2004. "Are Imports and Exports Cointegrated? An International Comparison," Metroeconomica, Wiley Blackwell, vol. 55(1), pages 49-64, 02.
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