Comparing the contributions of tourism and non-tourism exports to economic growth in Malaysia

Abstract

An in-depth study using data from 1974 to 2013 is conducted to assess the role of exports in Malaysia's economic growth through the neoclassical growth model. Unlike previous studies, we segregate exports into four major components, namely tourism, electrical and electronic (E&E), palm oil and rubbers. By doing so, we are able to assess the relative contributions of tourism and non-tourism (i.e. E&E, palm oil and rubbers) exports to Malaysia's economic growth. To achieve the objective of this study, we perform the cointegration, Granger causality and the variance decomposition tests. Our findings suggest that only tourism, E&E and palm oil exports significantly influence economic growth in the long-run. Likewise, our Granger causality results also suggest that only tourism, E&E and palm oil exports Granger-cause economic growth. Thus, it supports the tourism-led growth, E&E export-led growth (ELG) and palm oil ELG hypotheses in Malaysia. With reference to the contributions to economic growth, the long-run estimation results and the results of generalized variance decomposition consistently suggest that tourism is relatively more important than the three non-tourism exports, especially in explaining the long-term economic growth of Malaysia.

Keywords:

• causality
• economic growth
• exports
• Malaysia
• tourism

JEL Classification:

• C32

Acknowledgements

The constructive comments and suggestions from two anonymous reviewers are greatly appreciated. The authors would also like to thank David Giles for sharing the programming codes to compute the critical values for cointegration tests with breaks. Any remaining errors are the sole responsibility of the authors.

Disclosure statement

No potential conflict of interest was reported by the authors.

Supplemental data

Supplemental data for this article can be accessed at 10.1080/13683500.2015.1057108.

Notes

1. According to the existing literature, exports affect economic growth in several ways. First, exports would generate foreign exchange earnings and this will relax the foreign exchange constraint and enable the country to import the advanced capital goods (McKinnon, 1964; Thirlwall, 1979). Second, exports will increase efficiency and productivity via competition (Balassa, 1978). Third, exports enable technology and knowledge transfer from developed to the developing countries (Grossman & Helpman, 1991).

2. The full results for ADF and PP tests are available upon request.