How Macroeconomics Variables Affect Trade Openness in Malaysia from 1991 to 2020

Yap, Dionne Shuyi (2023) How Macroeconomics Variables Affect Trade Openness in Malaysia from 1991 to 2020. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

This paper attempts to investigate how the macroeconomics variables affect trade openness in Malaysia. This paper examines the short run and long run relationship between macroeconomics variables which are financial development, interest rate and economic growth with trade openness by employing annual data over the period 1991 to 2020. This paper also studies the causality among trade openness with all the macroeconomics variables. Towards these purposes, this paper employed Autoregressive Distributed Lag (ARDL), unit root test, Granger Causality test and other diagnostic tests. The long-run bound test suggest that economic growth have negative and statistically significant to affect trade openness. On the other hand, interest rate has negative long term relationship to affect trade openness but is not statistically significant. Moreover, financial development suggests having positive long run relationship with trade openness but also shows is not statistically significant. Lastly, there is a unidirectional causality from financial development to trade openness. There is also a unidirectional causality from interest rate to trade openness and a unidirectional causality from economic growth to trade openness