New Evidence on the Export‐led Growth Nexus: A Case Study of Malaysia

This paper revisits the highly debated export‐led growth hypothesis in a number of different ways using Malaysia as a case study. First, the hypothesis is tested in terms of labour and total factor productivity growth as a potential channel via which exports can affect or be affected by GDP growth. Considering the impact of imports on GDP and productivity growth serves a similar purpose. In addition, GDP is trade‐adjusted to avoid the double‐counting problem arising from the national income identity. Second, the relationships are examined using the relatively recent Toda and Yamamoto (1995 ) causality tests. These results have major implications and are necessary to reassess the effectiveness of trade policy as a strategy for economic development.