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A macro assessment of China effects on Malaysian exports and trade balances

Author

Listed:
  • Tze-Haw Chan
  • Hooi Hooi Lean
  • Chee-Wooi Hooy

Abstract

Purpose - – This paper aims to focus on the impact of China's export expansion on Malaysian monthly trading with to her 12 major trading partners over the liberalization era. Design/methodology/approach - – The analytical framework comprises of both the export and trade balance models. Unit root and cointegration tests with break and error correction modeling are employed in the analyses. Findings - – Regime shifts are evident in the long run where structural break(s) found mostly coincides with the Asia crisis and China's accession into WTO. While the income effects are more apparent in most cases, the real exchanges are rather insignificant and incorrectly signed for Malaysian bilateral trading. Besides, the trade balance estimation is generally more consistent that the Chinese exports have exhibited complementary effects in the long-run, mainly for advanced export destination such as Australia, Germany, Japan, the UK and the USA. On the whole, there is insufficient evidence to support the “PRC competitive threat”. Practical implications - – The empirical evidence disfavors currency devaluation for current account correction and reveals that the fear for China effect might be over-projected. Closer regional collaboration and trade integration between the two nations are well expected. Originality/value - – The paper assesses the China's crowding out effect and magnitudes of Malaysian export and trade balance elasticities with model specifications that consider structural breaks. The paper also assesses the macro dimension of income and real exchanges effects.

Suggested Citation

  • Tze-Haw Chan & Hooi Hooi Lean & Chee-Wooi Hooy, 2014. "A macro assessment of China effects on Malaysian exports and trade balances," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing Limited, vol. 7(1), pages 18-37, January.
    • Handle: RePEc:eme:jcefts:v:7:y:2014:i:1:p:18-37
    DOI: 10.1108/JCEFTS-11-2012-0019
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    4. repec:ipg:wpaper:2014-550 is not listed on IDEAS
    5. Chan, Tze-Haw, 2014. "Trade Balance, Foreign Exchange and Macroeconomic Impacts: An Empirical Assessment for China and Malaysia," MPRA Paper 59539, University Library of Munich, Germany, revised 10 Aug 2014.

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    More about this item

    Keywords

    China effect; Malaysian trading; Structural break;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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