ABSTRACT

The empirical result of this research has indicated that Cambodian export has a statistical significant relationship with the gross domestic product in both short-term and long-term, based on the result of Engle-Granger co-integration test and the estimated result of the Error Correction Model (ECM). The economy of Cambodia is proven to remain vulnerable, if the export of the country is negatively affected by the external shock. The evidence of the scenario analysis has demonstrated that if the export of Cambodia declines by 10% in only a quarter, the expected future of gross domestic output is expected to drop on average by approximately 1.38% per quarter which is equivalent to around 5.65% per year. Prominently, the speed of adjustment is seen to be significantly as slow as 3.33% per quarter. The synchronized policy formulation from the interviewing of the Cambodian Economists and Policymakers has advocated that the increasing of the government expenditure in developing the infrastructures, expanding and strengthening the SMEs, developing human capital, and supporting the agriculture, especially, pledging to reduce the BBC to the lowest level is the prioritized strategic plan which has to be implemented by the Royal Government of Cambodia in the short-term, medium-term and long-term to prevent the possible future economic recession and depression due to the external shock as well as to increase the level of the country competitiveness in the global market.

Keywords: Keywords: Co-integration test, ECM, Speed of adjustment, Scenario analysis.