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Trade and GDP Growth: Causal Relations in the United States and Canada

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  • George K. Zestos

    ()
    (Department of Economics and Finance, Christopher Newport University)

  • Xiangnan Tao

    ()
    (Department of Management and Economics, Jiangnan University)

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    Abstract

    Causal relations between the growth rates of exports, imports, and the GDP of Canada and the United States are studied using the vector error correction (VEC) model. Utilizing time-series annual data (1948–1996), Granger causality tests are performed within the framework of the VEC model. Bidirectional causality is supported for Canada from the foreign sector to GDP and vice versa. A weaker relationship between the foreign sector and GDP is statistically supported for the United States. These results are also supported by comparing the total trade (exports plus imports) shares to GDP of the two neighboring economies. The Granger causality tests suggest that Canada is a more open economy than the United States and more trade dependent.

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    Bibliographic Info

    Article provided by Southern Economic Association in its journal Southern Economic Journal.

    Volume (Year): 68 (2002)
    Issue (Month): 4 (April)
    Pages: 859-874

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    Handle: RePEc:sej:ancoec:v:68:4:y:2002:p:859-874

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    Cited by:
    1. Chang, Shu-Hwa & Huang, Liang-Chou, 2010. "The nexus of finance and GDP growth in Japan: Do real interest rates matter?," Japan and the World Economy, Elsevier, vol. 22(4), pages 235-242, December.
    2. bouoiyour, jamal, 2003. "Trade and GDP Growth in Morocco: Short-run or Long-run Causality?," MPRA Paper 28859, University Library of Munich, Germany.
    3. Florencia Médici, 2011. "A Cointegration Analysis on the Principle of Effective Demand in Argentina (1980-2007)," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(61-62), pages 103-137, January -.

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