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Testing Trade-led-Growth Hypothesis for Romania

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  • Pop-Silaghi, Monica Ioana

Abstract

This paper tests the relationship between trade and economic growth for the case of Romania, during 1998-2004. We employed cointegration and Granger-causality tests on stochastic systems composed of exports, imports and GDP. In order to have some degree of significance, we performed our tests on quarterly data. We found that exports do not Granger-cause GDP in the Romania’s case, while the inverse relationship holds. The presence of imports in the stochastic models does not affect significantly the results. For validating our results, we performed the same tests on the 10 countries that entered EU on 1 May 2005, Bulgaria and EU with 15 members and EU with 25 members. We found that only in few cases – Czech Republic, EU 15 and Bulgaria, export-led-growth hypothesis is verified. Bi-directional causality found for exports and output in the case of Czech Republic and EU 15 is implying a virtuous circle of growth and exports, case that should be desirable for all the countries from the sample. The analyzed countries have situations which differ from case to case and a unified framework can not be applying for a generalization of the results.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1321.

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Date of creation: Mar 2006
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Handle: RePEc:pra:mprapa:1321

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Keywords: growth; trade; causality; cointegration; time series;

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  1. Marin, Dalia, 1992. "Is the Export-Led.Growth Hypothesis Valid for Industrialized Countries?," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 678-88, November.
  2. Tyler, William G., 1981. "Growth and export expansion in developing countries : Some empirical evidence," Journal of Development Economics, Elsevier, vol. 9(1), pages 121-130, August.
  3. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
  4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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