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Does international trade lead industrial production or the other way around ? evidence from Malaysia

Ikram, Ahmad and Masih, Mansur (2018): Does international trade lead industrial production or the other way around ? evidence from Malaysia.

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Abstract

The focus of the paper is to discover a relationship between industrial production and international trade. This study is important as the result will help the policymakers draw the appropriate policies that affect these two aspects of the economy. The standard time series techniques are employed and Malaysia is used as a case study. We have reviewed a number of studies that analyze some other open East Asian countries such as, South Korea and Taiwan and we found that the relationship between the two variables in those countries is unidirectional from trade to industrial production, in the sense that trade openness tends to increase industrial production through technological transfer. In the case of Malaysia as well, the key empirical finding of this study is that international trade is driving the industrial production like many other East Asian open economies. The results are plausible and contain strong policy implications.

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