Existence of Export-Import Cointegration: A Study on Indonesia and Malaysia

This paper studies the long-run relationship between export and import of two Southeast Asian nations, Indonesia and Malaysia covering data of over 45 years from each country including pre and post-financial crisis period in Asia. This paper studied this phenomenon using two widely used tests Engle-Granger and Johansen cointegration tests. Two tests fail to find cointegration in Indonesia but found this in the Malaysian economy. The meaningfulness of Malaysian export-import cointegration was further tested which did not accept the underlying hypothesis of equal slope coefficients from the equations explaining the phenomenon. The stability tests also found Malaysian economy to be more stable than Indonesian economy.