Theoretical and Applied Economics
No. 4 / 2025 (645), Winter
The impact of short-run and long-run dynamics on manufacturing sector development in Indonesia and Malaysia
Universitas Sriwijaya, Indonesia
Doris Padmini SELVARATNAM
Universiti Kebangsaan Malaysia, Malaysia
MUKHLIS
Universitas Sriwijaya, Indonesia
Deassy APRIANI
Universitas Sriwijaya, Indonesia
HAMIRA
Universitas Sriwijaya, Indonesia
Dirta Pratama ATIYATNA
Universitas Sriwijaya, Indonesia
Abstract. This study analyzes the impact of manufacturing labor, industrial exports, lagged investment (t-1), and industrial policy (t-1) on manufacturing performance in Indonesia and Malaysia. The study compares short-run and long-run effects in both countries using annual data from 1991–2022 and the ARDL (Autoregressive Distributed Lag) model. In the short run, Indonesia exhibits significant positive effects from labor, exports, and lagged investment, while industrial policy has no significant impact. Malaysia records significant short-run effects from labor and exports, but not from investment and industrial policy. In the long run, all variables except industrial policy positively and significantly influence manufacturing performance in both countries. The findings highlight differing policy impacts despite structural similarities. These results imply that Indonesia should strengthen policies that sustain investment and enhance labor productivity in manufacturing. Malaysia needs to prioritize labor upgrading and export-oriented industrial strategies to ensure long-term competitiveness in the manufacturing sector.
Contents
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The impact of short-run and long-run dynamics on manufacturing sector development in Indonesia and Malaysia
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