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Arize, A., Ndubizu, G. Impact of the Terms of Trade on the Trade Balance of Malaysia: An Empirical Examination. Credit and Capital Markets – Kredit und Kapital, 23(1), 125-138. https://doi.org/10.3790/ccm.23.1.125
Arize, Augustine and Ndubizu, Gordian "Impact of the Terms of Trade on the Trade Balance of Malaysia: An Empirical Examination" Credit and Capital Markets – Kredit und Kapital 23.1, 1990, 125-138. https://doi.org/10.3790/ccm.23.1.125
Arize, Augustine/Ndubizu, Gordian (1990): Impact of the Terms of Trade on the Trade Balance of Malaysia: An Empirical Examination, in: Credit and Capital Markets – Kredit und Kapital, vol. 23, iss. 1, 125-138, [online] https://doi.org/10.3790/ccm.23.1.125
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Impact of the Terms of Trade on the Trade Balance of Malaysia: An Empirical Examination

Arize, Augustine | Ndubizu, Gordian

Credit and Capital Markets – Kredit und Kapital, Vol. 23 (1990), Iss. 1 : pp. 125–138

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Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.23.1.125
Language
Multiple languages
Pages
14

Author Details

Augustine Arize, Commerce/Texas

Gordian Ndubizu, Commerce/Texas

References

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  39. Bahmani-Oskooee, Mohsen (1985): “Devaluation and the J-curve: Some Evidence From LDCs.” Review of Economics and Statistics 85: 500 – 504.  Google Scholar
  40. Blau, David M. (1985): “The Effects of Economic Development on Life Cycle Wage Rates and Labor Supply Behavior in Malaysia.” Journal of Development Economics 19: 163 – 185.  Google Scholar
  41. Branson, William H. (1972): “The Trade Effects of the 1971 Currency Realignments.” Brookings Papers on Economic Activity 1: 15 – 69.  Google Scholar
  42. Darrat, A. F.: “Are Exports an Engine of Growth? Another Look at the Evidence.” Applied Economics 19: 277 – 283. Far Eastern Economic Review. Asia 1976 Yearbook.  Google Scholar
  43. Farley, I. U., and Hinich, M. J. (1972): “A Test for a Shifting Slope Coefficient in a Linear Model.” Journal of the American Statistical Association 65: 1302 – 9.  Google Scholar
  44. Feldman, R. A. (1982): “Dollar Appreciation, Foreign Trade, and the U.S. Economy.” Federal Reserve Bank of New York Summer: 1 – 9.  Google Scholar
  45. Felmingham, B. S. (1988): “Where is the Australian J-curve?” Bulletin of Economic Research 40: 1: 43 – 56.  Google Scholar
  46. Giles, D. E., and Smith, R. G. (1977): “A Note on the Minimum Error Variance Rule and the Restricted Regression Model.” International Economic Review 18: 247 – 251.  Google Scholar
  47. Goldstein, Morris, and Khan, Mohsin S. (1985): “Income and Price Effects in Foreign Trade.” In Jon s, Ronald W., and Kenen, Peter B. (Eds.), Handbook of International Economics, 2, Amsterdam: 1041 – 1105.  Google Scholar
  48. Goldstein, Morris and Khan, Mohsin S. (1976): “Large Vs. Small Price Changes in the Demand for Imports.” IMF Staff Papers 23: 200 – 225.  Google Scholar
  49. Goldstein, Morris, and Young, John (1979): “Exchange Rate Policy: Some Current Issues.” Finance and Development March: 7-10.  Google Scholar
  50. Hakkio, C. S., and Roberts, Richard (1987): “Has the Dollar Fallen Enough?” Federal Reserve Bank of Kansas City July/ August: 24 – 41.  Google Scholar
  51. Harvey, A. C. (1981): The Econometric Analysys of Time Series, Phillip Allan: Oxford.  Google Scholar
  52. Haynes, Stephen, and Stone, Joe A. (1979): “Impact of the Terms of Trade on the U.S. Trade Balance.” Review of Economics and Statistics 16: 702 – 706.  Google Scholar
  53. Hsiao, Cheng (1981): “Autoregressive Modelling and Money-Income Causality Detection.” Journal of Monetary Economics 7: 85 – 106.  Google Scholar
  54. Johnston, J. (1984): Econometric Methods, Third Edition, New York: McGraw-Hill.  Google Scholar
  55. Junz, Helen, and Rhomberg, Rudolf R. (1973): “Price Competitiveness in Export Trade Among Industrial Countries.” American Economic Review, Papers and Proceedings 63: 412 -418.  Google Scholar
  56. Krueger, Ann D. (1983): Exchange Rate Determination, Cambridge University Press: Cambridge.  Google Scholar
  57. Magee, Stephen P. (1973): “Currency Contracts, Pass Through and Devaluation.” Brookings Paper on Economic Activity, 303 – 325.  Google Scholar
  58. “Malaysia – A Time for Consolidation,” Supplement EUROMONEY, April 1987.  Google Scholar
  59. McPheters, LeeR. and Stronge, William B. (1979): “Impact of the Terms of Trade on the U.S. Trade Balance: A Cross-Spectral Analysis.” Review of Economics and Statistics 16: 451 -455.  Google Scholar
  60. Miles, Marc A. (1979): “The Effects of Devaluation on the Trade Balance and Balance of Payments: Some New Results.” Journal of Political Economy 87 June: 600 – 620.  Google Scholar
  61. New Straits Times (July 9, 1984): (Kuala Lumpur).  Google Scholar
  62. Rahman, Abdul Tuhku (1984): Contemporary Issues in Malaysian Politics. (Petaling Jaya: Pelanduk Publications).  Google Scholar
  63. Ram, R. (1985): “Exports and Economic Growth: Some Additional Evidence.” Economic Development and Cultural Change 33: 415 – 25.  Google Scholar
  64. Ramsey, J.B. (1969): “Tests for Specification Errors in Classical Linear Least Squares Regression Analysis.” Journal of the Royal Statistics Society Series B 31: 350 – 1.  Google Scholar
  65. Ramsey, J. B., and Gilbert, Roy (1972): “A Monte Carlo Study of Some Small Sample Properties of Tests for Specification Error.” Journal of American Statistical Association 67: 180 -186.  Google Scholar
  66. Schlegel, Charles C. (1981): “Development, Equity, and Level of Living in Peninsular Malaysia.” The Journal of Developing Areas 15: 297 – 316.  Google Scholar
  67. Schmidt, P., and Waud, R. N. (1973): “The Almon Technique and the Monetary Versus Fiscal Debate.” Journal of American Statistical Association 68: 11 – 19.  Google Scholar
  68. Spitaller, Erich (1980): “Short-Run Effects of Exchange Rate Changes on Terms of Trade and the Trade Balance.” IMF Staff Papers June: 320 – 48.  Google Scholar
  69. Thursby, J. G. (1981): “A Test Strategy for Discriminating Between Autocorrelation and Misspecification in Regression Analysis.” Review of Economics and Statistics 62: 117 – 123.  Google Scholar
  70. Thursby, J. G.(1979): “Alternative Specification Error Tests: A Comparative Study.” Journal of American Statistical Association 74: 222 – 225.  Google Scholar
  71. Thursby, J. G., and Thursby, Marie (1984): “How Reliable are Simple, Single Equation Specifications of Import Demand?” Review of Economics and Statistics 66: 120 – 128.  Google Scholar
  72. Ueda, Kazuo (1983): “Trade Balance Adjustment With Imported Intermediate Goods: The Japanese Case.” Review of Economics and Statistics 65: 618 – 625.  Google Scholar
  73. White, H. (1980): “A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity.” Econometrica 48: 817 – 38.  Google Scholar
  74. Wilson, A. L. (1978): “When is the Chow Test UMP?” The American Statistician 32: 66 – 68. – World Develvopment Report 1985 (1986).  Google Scholar

Abstract

Impact of the Terms of Trade on the Trade Balance of Malaysia: An Empirical Examination

This paper presents estimates of the impact of changes in terms of trade on Malaysia’s trade balance. The Almon lag procedure, Akaike final prediction error (FPE) and Theil’s residual variance criteria are used in the empirical estimation. The dependent variable in the preferred equation is the ratio of the value of imports to exports whereas the explanatory variables are terms of trade in domestic currency, high-power money, weighted income of trading partners and a trend variable. The empirical results suggest that the lag pattern on the terms of trade variable is not that of the typical J-curve process. In addition, over the sample-period, 1973: 1 through 1985: 4, there was no evidence that deterioration in terms of trade improved the trade balance.

Table of Contents

Section Title Page Action Price
Augustine Arize/Gordian Ndubizu: Impact of the Terms of Trade on the Trade\rBalance of Malaysia: An Empirical Examination 125
I. Introduction 125
II. Trends in the Malaysian Economy 128
III. Model Specification 129
IV. Empirical Results 131
V. Conclusion 134
Appendix 135
References 135
Zusammenfassung: Die Wirkung der Terms of Trade auf die Handelsbilanz von Malaysia: eine empirische Studie 137
Summary: Impact of the Terms of Trade on the Trade Balance of Malaysia: An Empirical Examination 137
Résumé: Les conséquences des indices de commerce extérieur sur la balance commerciale de Malaisie: un examen empirique 138

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