The export‐led growth in Malaysia: Does economic policy uncertainty and geopolitical risks matter?

• Published date: 01 February 2022
• Author: Festus Fatai Adedoyin,Joseph Olarewaju Afolabi,Kürşat Yalçiner,Festus Victor Bekun
• Date: 01 February 2022
• DOI: http://doi.org/10.1002/pa.2361

ACADEMIC PAPER

The export-led growth in Malaysia: Does economic policy

uncertainty and geopolitical risks matter?

Festus Fatai Adedoyin

1

| Joseph Olarewaju Afolabi

2

| Kürs¸at Yalçiner

3

|

Festus Victor Bekun

4,5

1

Department of Accounting, Finance and

Economics, Bournemouth University,

Poole, UK

2

Economic and Business Policy department,

Nigerian Institute of Social and Economic

Research (NISER), Ibadan, Nigeria

3

Faculty of Economics, Administrative and

Social Sciences, Istanbul Gelisim University,

Avcilar, Istanbul, Turkey

4

Department of Logistics and Transportation,

Istanbul Gelisim University, Istanbul, Turkey

5

Department of Accounting, Analysis and

Audit, School of Economics and Management,

South Ural State University, Chelyabinsk,

Russia

Correspondence

Festus Victor Bekun, Department of Logistics

and Transportation, Istanbul Gelisim

University, Istanbul, Turkey.

Email: fbekun@gelisim.edu.tr

In spite of the fact that the connection between exports of goods and services and

economic growth has for quite some time been talked about, the examination of the

relationship in light of recent global events such as economic policy uncertainty and

geopolitical risks is yet to be given the required attention. Various empirical researches

have demonstrated that the export-led growth hypothesis (ELGH) holds for singular

nations in terms of overall economic development. However, this study re-examines

the ELGH with a special focus on the absolute and mediating impact of economic pol-

icy uncertainties and geopolitical risks. With data spanning the period 1980 to 2018.

Empirical results from the Autoregressive distributed lag model and the error correc-

tion models suggest that for Malaysia,Economic Policy Uncertainty (EPU)exerts a neg-

ative impact on growth evens as its moderating impact on exports leads to negative

economic growth.On the other hand, the impact of Geopolitical risk on growth is both

negative and positive but insignificant in the short-run and long-run respectively. The

study suggests thegovernment of Malaysia works to ensuremacroeconomic and polit-

ical stability toachieve export-driven growth in thecountry.

1|INTRODUCTION

The debate on the driving forces and accelerators of economic growth

has been a keynote topic of considerable policy discussion in the liter-

ature (Chirwa & Odhiambo, 2019; Recuero Virto & Couvet, 2018;

Vedia-Jerez & Chasco, 2016; Wadud, 2017). The general submission

is that economic growth is a multifaceted concept that is affected by

several variables. Export is one of the vital economic activities that

touch the interest of every national economy (Ibrahim, 2002;

Napoles, 2001; Shahbaz, Azim, & Ahmad, 2011; Tang, 2006). To but-

tress the argument of the non-newness in the literature, exports as

one of the deterministic variables of economic growth, it was argued

in Classical economic school of thought as postulated by Smith (1776)

and David Ricardo (1817) that international trade is a key factor in

determining economic growth in every economy and that every econ-

omy gains from international trade through specialization.

However, the imperat ive role of export in stimulating growth

has led to a number of debates among policymakers and researchers

over the past few decades. A number of empirical studies discovered

a significant positi ve relationship between export gro wth and eco-

nomic growth (Dar, Bhanja, Samantaraya, & Tiwari, 2013; Ee, 2016;

Shahbaz et al., 2011; Tang & Abosedra, 2019) while some other

stems of studies found the opposite (Hai, Hai and Hung, 2018;

Quaicoe, Aboagye, & Bokpin, 2017). This hot debate led to the for-

mation of export-le d growth (ELG) hypothesis. ELG hy pothesis gen-

erally denotes the exi stence of a significant positive relationship

between exports and eco nomic growth, in particular, product ivity

growth is determined by the level of exports. ELG hypothesis holds

that increasing the am ount of labor and capital in an economy are

not every time the only medium through which overal l economic

growth can be achieved b ut also huge investment in exports. Th e

theory of ELG postulat es that expansion of export can boost e co-

nomic growth through various means. These include the promot ion

of effective and incr eased productivity through the fo cus on special-

izing in sectors with c omparative advantages and more ef fective

production techniqu es, expansion of the market size and intensifie d

technological advancement due to the ever-increasing avenues for

competition in the global market.

Received: 28 April 2020 Revised: 21 June 2020 Accepted: 2 August 2020

DOI: 10.1002/pa.2361

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https://doi.org/10.1002/pa.2361