Page 224 - Contributed Paper Session (CPS) - Volume 8

CPS2256 Norzarita Samsudin
It is found that real GDP Granger cause sales value of retail trade, while
sales value of retail trade doesn’t Granger cause real GDP.

4.4 Impulse Response Function (IRF)
IRF is to study reaction (in future) between Malaysia real GDP and sales
value of retail trade in a period of time if there is a shock in the VAR system
(model). In this study, ten periods or quarters are selected.
Response on sales value of retail trade (Graph 1). A one standard deviation
shock to GDP has noticeable impact on retail sales. The response significantly
increases until period 10th where it maintains in positive region.

Graph 1: Impulse Response Function: Response on Sales Value of Retail
Trade

Source: Author’s computation
Note. X is sales value of retail trade; Y is real GDP.

Response on Real GDP (Graph 2). A one standard deviation shock to sales
value of retail sales initially has no reaction to real GDP in the short term. But
there appears negative reaction gradually and steadily until to period ten
where it remains in the negative region. We conclude a shock to sales value of
retail sales give marginal negative impact to GDP in the short and long run.

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