Impact of international trade on economic growth in a developing nation-A case study of Malaysia

Malaysia had recorded the highest income per capita, in the Asia-Pacific region, reaching about USD 1408.60, during the time of independence in 1957. However, the ranking dropped in the last two decades. This was due to the dramatic economic expansion in the four East Asian, newly industrialized countries. Findings also revealed that export and inflation rate did not significantly impact economic growth in Malaysia. This study concludes that foreign direct investment, trade openness and exchange rate did play an important role, in the determination of growth. A major policy implication of this study is that the Malaysian Government should create policies, that encourage trade openness and foreign direct investment and monitor exchange rate instability. They also need to consider the likely influence of the exchange rate changes, on the macroeconomic factors.