The determinants of exports for Sabah
This study aims to identify the determinants of exports for Sabah. The Heckscher–Ohlin Model (H–O model) on international trade highlighted that a country will export products by using their abundant and cheap factors of production and import products which are produced by the countries' scarce...
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| Format: | Thesis |
| Language: | English English |
| Published: |
2014
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| Subjects: | |
| Online Access: | https://eprints.ums.edu.my/id/eprint/38956/2/24%20PAGES.pdf https://eprints.ums.edu.my/id/eprint/38956/1/FULLTEXT.pdf |
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| Summary: | This study aims to identify the determinants of exports for Sabah. The Heckscher–Ohlin Model (H–O model) on international trade highlighted that a country will export products by using their abundant and cheap factors of production and import products which are produced by the countries' scarce factors. This will enable the country to experience economic of scale and reduce the cost of production. Based on H-O model, Sabah that has abundant natural resources should have high export earnings arising from plenty of natural resources such as crude oil, palm oil, timber and sea products. However, export of Sabah is still low in term of its contribution to the national export. Hence, question arises on what are the factors that influence exports of Sabah. The study used annual data from 1980 to 2010. Export of Sabah is a dependent variable, meanwhile independent variables are gross domestic product of Sabah (GDP), foreign direct investment of Sabah (FDI), producer price index (PPI), development expenditures of Sabah (DE) and exchange rate (ER). The analysis began with the Ordinary Least Square (OLS) estimation. When the value of R2 was high but the value of Durbin Watson (DW) was low, the existence of autocorrelation was confirmed. Thus the analysis was further extended with the Augmented Dickey Fuller (ADF) test to confirm unit root problem. Johansen Cointegration test was used to determine long run relationship between the dependent and independent variables and the number of cointegrating vectors. Meanwhile the Vector Error Correction Model (VECM) was used to determine the short run relationship between export of Sabah and its independent variables. The empirical result of OLS revealed that gross domestic product of Sabah, producer price index and development expenditures of Sabah were significant in explaining the changes in export of Sabah. However, there was no short run relationship between export of Sabah and gross domestic product of Sabah, foreign direct investment of Sabah, producer price index, development expenditures of Sabah and exchange rate. The study found that gross domestic product of Sabah and foreign direct investment of Sabah were statistically significant and have positive relationship with export of Sabah in the long run. However, the producer price index, development expenditures of Sabah and exchange rate were statistically significant but their relationships with export were against to the hypothesis of the study. Increases in the producer price index and the exchange rate had a positive relationship instead of a negative relationship with export meanwhile development expenditures had a negative relationship with export of Sabah instead of a positive relationship. Finally, several recommendations were suggested to increase the export of Sabah. |
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