Exports, Domestic Demand, and Real GDP Per Capita: Empirical Evidence from Malaysia

Abstract

This study examined the role of exports and domestic demand on real gross domestic product (GDP) per capita in Malaysia. There was weak evidence that real GDP per capita Granger causes domestic demand and exports and exports Granger cause real GDP per capita. Government consumption and investment are found to Granger cause real GDP per capita. However, the results of Geweke (1982) decomposition of causality showed that linear dependence between domestic demand and real GDP per capita and linear dependence between exports and real GDP per capita are dominated by contemporaneous causality between these variables. Generally, domestic demand and exports are important to real GDP per capita, and real GDP per capita, is important to domestic demand and exports in Malaysia.