This study investigates the relationship between export, inflation, investment and economic growth for the three ASEAN countries, namely Indonesia, Malaysia and Thailand. In general, the results reveal that export has a positive impact on growth. As for, Malaysia and Thailand, inflation has a negative impact on growth; while for Indonesia it has a positive impact. The inflation rate for Indonesia has remained more or less consistent over several years, which has led to the positive relationship between inflation and growth. However, modest increase in the rate of inflation has also been noticed in certain years. The results show that investment has a positive impact on growth for Indonesia, Malaysia and Thailand.
The issue of export promoting growth has been the central theme for international trade economists and policymakers. Numerous studies have been conducted dealing with different aspects of this impact toward economic growth. Many of these studies have focused on testing whether export leads to improvement in economic growth performance. Causal inspection of export and economic growth in developing market economies reveals that these two time series tends to move together (Bahmani-Oskooee and Alse, 1993; Ahmad and Harnhirun, 1995; Ghatak et al., 1997; Biswal and Dhawan, 1998; Baharumshah and Rashid, 1999; Hossain and Karunaratne, 2004; Mamun and Nath, 2005; Tang, 2006; and Siliverstovs and Herzer, 2007 ). Empirically these authors argued that the export-led growth strategy which supports the export expansion seems to promote high economic performance and vice-versa.
In addition to export-growth relationship, economists particularly have relevant reason to wonder whether inflation is generally conducive or detrimental to economic growth. There is still substantial disagreement among the empirical researchers, about how quantitatively important are the growth depressing effects of inflation and at what levels of inflation these effects begin to appear. Some economists have been concerned regarding inflation rates of 3% or 4%, while others have been unconcerned of 20% or 30% inflation rates. For instance, Mallik and Chowdhury (2001) showed that low inflation is positively correlated to economic growth in a particular country. Hodge (2006) found that inflation had dragged down growth in South Africa over a long period of time. Lim (2004) on the other hand, highlighted the need for inflation management in order to attain short run stabilization as well as long-term inflation goals for the South East Asian Central Banks (SEACEN) countries. |
