Page 149 - Contributed Paper Session (CPS) - Volume 4

CPS2160 Aye Aye Khin et al.
Ha1: There is a negative relationship between the world NR price and the
import demand for rubber latex products of China, India, USA, and Japan.
Ho2: There is no negative relationship between the exchange rate and the
import demand for rubber latex products of China, India, USA, and Japan.
Ha2: There is a negative relationship between the exchange rate and the
import demand for rubber latex products of China, India, USA, and Japan.
Ho3: There is no negative relationship between the domestic NR export
price and the import demand for rubber latex products of China, India, USA,
and Japan.
Ha3: There is a negative relationship between the domestic NR export price
and the import demand for rubber latex products of China, India, USA, and
Japan.

2.2 Data Collection and Sources of Data
The data collection period is ranged from January 2004 to December 2016.
Data will be collected from Malaysian Rubber Board (MRB), International
Rubber Study Group (IRSG), Malaysian Rubber Export Promotion Council
(MREPC), Association of Natural Rubber Producing Countries (ANRPC) and
Department of Statistics in Malaysia.

2.3 Unit-Root Test
According to (Studenmund, 2017), the unit-root test is used to check for
stationary of the data series. The series variables are non-stationary, with mean
and variance non constant (unit root). The null hypothesis Ho shows that the
time series data is unit root (nonstationary) while alternative hypothesis Ha
shows that the time series data is no unit root (stationary). There are two
common unit root tests which are Augmented Dickey-Fuller (ADF) test and
Phillip-Perron (PP) test. ADF test is used to check for random walk components
in the residuals. PP test specifies the number of periods of serial correlation to
st
include. Based on the unit-root test, all the data are 1 difference stationary at
the integrated in order 1 at ADF and PP test, i.e I (1) is at stationary.

2.4 Vector Error Correction Method (VECM) and Co-integration Test
A vector error correction method (VECM Model) is a restricted vector
autoregression (VAR) designed for use with non-stationary series that is
cointegrated. A VECM model includes a cointegration equation and VECM
equations. The cointegration equation is built into the specification in order to
restrict the long-term behaviour of the endogenous variables to converge to
their cointegrating relationship. The VECM equations on the other hand are all
endogenous variables while allowing for short-term adjustment dynamics
(Studenmund, 2017).

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