Abstract
The main objective of this study is to explore the long-run and short-run relationship between trade and other macroeconomic variables of Malaysian and the BRICS countries. To test relationship between trade and other macroeconomic variables, the empirical investigation will be conducted based on the dynamic ordinary least square (DOLS) and fully modify ordinary least square (FMOLS) model for the period 1980-2015. Results of both DOLS and FMOLS show that out of all the variables included in the model distance between Malaysia and BRICS countries and corruption of both side have negative affect on bilateral trade between them. Whereas, GDP, GDP per capita and trade to GDP ratio are positively contribute in the bilateral trade. However, inflation and exchange rate of Malaysia and BRCIS countries have no effect on the bilateral trade between Malaysia and BRICS countries. The findings suggest that economic strengthening as the basis for increase in trade between Malaysia and BRICS members. Investment appears to be complementary to the trading relations in the Malaysia-BRICS case. The social capital also plays role in supporting the trade
Highlights
Since 2010, five newly emerging economies collectively known as ‘BRICS’ (Brazil, India, Russia, China and South Africa) have caught the imagination and scholarly attention of political scientists, economists and development specialists
There are extensive literatures on analyzing BRICS economy especially on trade relationship, specific studies dealing with bilateral trade between Malaysia and the BRICS member countries are few
The cross sectional augmented IPS (CIPS) test results suggest that there may be a long-run equilibrium relationship among the variables since all of the variables are integrated with the same order
Summary
Since 2010, five newly emerging economies collectively known as ‘BRICS’ (Brazil, India, Russia, China and South Africa) have caught the imagination and scholarly attention of political scientists, economists and development specialists. It is high time for Malaysia to response to the effects of globalization and economic liberalization by strengthening their economic and trade relations with the BRICS economy. In recent years, it is in the interest of the Malaysian government to shift its trade dependency on the traditional markets and exploring new markets for exports and imports. This study will eventually provide some policy analysis and develop policy recommendations in an effort to enhance Malaysia’s trade with the BRICS member countries in the near future. There are several objectives of this study such as; (1) to examine the pattern of trade between Malaysia and the BRICS member countries; (2) to identify the determinants of Malaysia’s trade with the BRICS member countries; and (3) to provide the policy recommendations to improve Malaysia-BRICS trade relationship
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