Page 219 - Contributed Paper Session (CPS) - Volume 8

CPS2256 Norzarita Samsudin

If retail trade sales falls, will GDP Follow? A case
study of Malaysia
Norzarita Samsudin, Zainuddin Ahmad
Department of Statistics Malaysia

Abstract
Sales value of retail trade for Malaysia grew quite significant lately. In 2016, it
registered 8.7 per cent growth, while in 2017, it posted 11.5 per cent. In the
meantime, Malaysia’s Gross Domestic Product (GDP) registered 4.2 per cent
growth in 2016, and 5.9 per cent in 2017, respectively. The objective of this
study is to examine relationship between sales value of retail trade and GDP
of Malaysia where quarterly sales value of retail trade and GDP of Malaysia is
used. This study uses econometric analysis i.e. Vector Autoregressive (VAR).
Granger causality test is applied to study causality between the studied
variables. This paper also examines future reaction of the studied variables
where Impulse Response Functions (IRF) and Variance Decomposition are
applied. The results of Johansen Cointegration Test show that there is no
cointegration in the long run between the studied variables. In the short run,
sales value of retail trade lag one and Malaysia real GDP lag one have positive
relationship with Malaysia real GDP. Granger causality test shows real GDP
Granger cause retail sales, while retail trade sales doesn’t Granger cause GDP.
If there is a positive shock to Malaysia real GDP, sales value of retail trade will
react positively both in the short and long run. Conversely, a shock to retail
sales gives a marginal negative impact to GDP in the short and long run. In
Variance Decomposition of real GDP study, it is found sales value of retail
trade’s contribution is very small in short and long run. Meanwhile, Variance
Decomposition of sales value of retail trade reveals that contribution of real
GDP is increasing more significant in long run.

Keywords
Sales value of retail trade; growth; GDP; sales; Malaysia

1. Introduction
Retail trade is one of important activities in any economy. Sales value of
retail trade is also a very essential component of GDP, whereby rising retail
trade means a growth in consumption and a fall in unemployment. Sales value
of retail trade consists of selling merchandise in the state that it is purchased
(or after minor transformations), generally to a customer base of private
individuals, regardless of the quantities sold. In addition to sales, retail trade
activity may also cover delivery and installation at the customer's home (of

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