Page 146 - Contributed Paper Session (CPS) - Volume 4

CPS2160 Aye Aye Khin et al.

Economic determinants of import demand for
rubber latex products: an econometric analysis
for top 4 rubber consuming countries
Aye Aye Khin, Raymond Ling Leh Bin, Yogambigai a/p Rajamoorthy,
Evelyn Mok Jo-yee, Chai Jie Si
Faculty of Accountancy & Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Jalan
Sungai Long, Bandar Sungai Long, Cheras, 43000 Kajang, Selangor, MALAYSIA

Abstract
The research study is to investigate the economic determinants that are being
used to analyze on the import demand for rubber latex products of the top 4
rubber consuming countries such as China, India, USA and Japan. Each import
demand model has specifications for world natural rubber (NR) price,
exchange rate and domestic NR export price. The models used the
econometric analysis such as Vector Error Correction Method (VECM) equation
with co-integration analysis and granger causality test. Monthly data from
January 2004 to December 2016 were used as an estimation period. The results
for VECM are in line with the hypothesis development, where the world NR
price, exchange rate and domestic export price have negative relationship with
the import demand for China, India, USA and Japan. Furthermore, normality
test and heteroskedasticity test are used to examine the model in order to
portray an accurate and precise of the models. The findings of this study are
able to provide information to fill the gap by determine the import volume on
current and potential market such as China, India, USA and Japan and also
market participants in their consumptions and financing decisions due to NR
is an important commodity for world market.

Keywords
Import Demand; Rubber Latex Products; VECM; Econometric Analysis; Top 4
Rubber Consuming Countries

1. Introduction
The rubber latex is obtained from the bark of the rubber-tree through the
trapping process. The transformation of the raw latex is able to manufacture
more than 50,000 types of rubber products. The inclusion of the many types
of rubber products are such as natural rubber is can be used for making
medical gloves, tyres, inner tubes, catheters, footwear, rubber bands, rubber
sheets, condoms and so on. After the products has been manufactured and
packaged, it will be exported to other countries worldwide (Hnin, 2017).
In the past few years, the world NR industry has grown rapidly and changes
fundamentally with appearance of many competitors bring latest technology
or product into the market. Indian rubber industry has also been growing in
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