hypothesis of a unit root (c=0). The results are presented in Table 1 below. The table highlighted that all variables real imports, GNI, Domestic Price, Import Price and Simple Average Tariff are integrated in order one, I(1). This means that they are stationary in their first difference. Insert Table 1a, 1b and 1c here the ADF test were undergone, the author went on to the vector error correction model. Before the modelling could be done, for the Johansen method, it is crucial to specify an appropriate lag length for the VAR. For all of the eight subsectors, 2-year lag length was the most appropriate. As for the trace test, for each different sectors the cointegration ranking differs. Table 2 below, shows the Johansen test for cointegration and the appropriate lags chosen for each of the eight sub sectors. Table 3 presents the normalised cointegrating equation estimate for all of the subsectors. Insert Table 2a-h, here Insert Table 3a-h, here In the next step, error correction model was estimated. The rank is set to 1, which is the default number of the error correction terms. An error correction model was estimated to examine the long run behaviour of Malaysian imports (according to their 8sectors). The lagged residual from the Johansen Cointegration Equation was included the dynamic general ECM. The general equation for ECM with 2 lag length is stated as below: ln Mt b0 + b1i lnM + ln Yt-2+ lnIt-2 + lnDt-2 b6 ECt-2 + error term = t-2 +lnTt-2 + (6) where EC is residual error derived from the cointegrating vector. This dynamic general equation is used separately for all the 8 sectors and presented in the next section.
hypothesis of a unit root (c=0). The results are presented in Table 1 below. The table highlighted that all variables real imports, GNI, Domestic Price, Import Price and Simple Average Tariff are integrated in order one, I(1). This means that they are stationary in their first difference. Insert Table 1a, 1b and 1c here the ADF test were undergone, the author went on to the vector error correction model. Before the modelling could be done, for the Johansen method, it is crucial to specify an appropriate lag length for the VAR. For all of the eight subsectors, 2-year lag length was the most appropriate. As for the trace test, for each different sectors the cointegration ranking differs. Table 2 below, shows the Johansen test for cointegration and the appropriate lags chosen for each of the eight sub sectors. Table 3 presents the normalised cointegrating equation estimate for all of the subsectors. Insert Table 2a-h, here Insert Table 3a-h, here In the next step, error correction model was estimated. The rank is set to 1, which is the default number of the error correction terms. An error correction model was estimated to examine the long run behaviour of Malaysian imports (according to their 8sectors). The lagged residual from the Johansen Cointegration Equation was included the dynamic general ECM. The general equation for ECM with 2 lag length is stated as below: ln Mt = b0 + b1i lnM t-2 + ln Yt-2+ lnIt-2 + lnDt-2 +lnTt-2 + b6 ECt-2 + error term (6) where EC is residual error derived from the cointegrating vector. This dynamic general equation is used separately for all the 8 sectors and presented in the next section.