Trade Sustainability in the Forestry Domain: Evidence from Malaysia using Johansen and Bound Test Method

Abstract

This study was undertaken to explore the relationship between export and import, in the category of Forestry domain for Malaysia, which includes sub domain (1) industrial roundwood;(2) wood pulp; (3) wood fuel; (4) paper and paper board; (5) sawn wood; (6) recovered paper and (7) wood base panel. To test the robustness, Johansen (1991) cointegration method and ARDL approach were employed and the period of the study covers annual data from 1961 to 2007. The results clearly show that the export and import of forestry domain is highly cointegrated. This shows trade is indeed sustainable in the domain of forestry and a sign of good trade policies adapted and implemented by the relevant authorities Bi-directional granger causality could also be detected based on VECM (vector-error correction model) method. Imports seem to positively and significantly affect exports, both in the long run and short run, vice versa. The results are robust when we employed the Bounds test as well.Johansen cointegration test, forestry trade, VECM, ARDL