The Relationship between Inflation and Economic Growth on Imports in Malaysia

This study examines the relationship among inflation, economic growth, and imports in Malaysia using annual time-series data from 1970 to 2018. As an open developing economy, Malaysia is highly exposed to external trade dynamics, making imports a critical component of domestic consumption, production, and economic development. Fluctuations in inflation and economic growth are therefore expected to play an important role in shaping import behaviour and overall macroeconomic stability. The study adopts a quantitative research design and utilises secondary data obtained from the World Bank. Imports are specified as the dependent variable, while inflation, measured by the Consumer Price Index (CPI)and economic growth, proxied by Gross Domestic Product (GDP), are treated as independent variables. Prior to estimation, the stationarity properties of the variables are examined using the Augmented Dickey–Fuller (ADF) unit root test. Following confirmation of stationarity after first differencing, the Ordinary Least Squares (OLS) method is employed to estimate the relationship among the variables. Diagnostic tests, including serial correlation and heteroskedasticity tests, are conducted to ensure the robustness and reliability of the estimated model. The empirical results reveal that economic growth has a positive and statistically significant effect on imports, indicating that higher output and income levels stimulate import demand in Malaysia. In contrast, inflation is negatively associated with imports, suggesting that rising price levels suppress import demand by reducing purchasing power and increasing costs. These findings confirm that inflation and economic growth jointly influence import behaviour in Malaysia. Overall, the study provides empirical evidence that macroeconomic stability is essential for sustaining balanced trade performance. The findings offer valuable insights for policymakers in designing effective inflation management and trade strategies to support sustainable economic growth in Malaysia. Keywords: Inflation; Economic Growth; Imports; Malaysia; Ordinary Least Squares

Relationship ,Inflation ,Economic ,Growth

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