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Causality between Export and Growth: Evidence from South Asian Countries

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  • Eusuf, M Abu
  • Ahmed, Mansur

Abstract

Strong economic growth accompanied with robust export performance leads many people to conclude that export sector of a country has pivotal role in the economic growth of that country. Empirical evidence on export growth nexus has been mixed and inconclusive. This study examined whether there was any time series support for such export-led growth hypothesis for South Asian Countries. Engle-Granger's Error Correction Model (ECM) was used to test the Granger causality between export and output. The study had produced fairly mixed results, and did not find any conclusive evidence in favor of export-led growth for South Asian Countries. While Pakistan, Srilanka and Bhutan were the cases of export-led growth, India, Nepal, and Maldives show the opposite result of growth-led exports. In one country, namely Bangladesh, the data had failed to detect any causality in either direction which is attributed in low value addition in export.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21027.

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Date of creation: 20 Dec 2007
Date of revision: 25 May 2008
Publication status: Published in The Jahangir Nagar Economic Review 1.19(2008): pp. 73-86
Handle: RePEc:pra:mprapa:21027

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Keywords: Export-led growth hypothesis; Granger causality test; Unit Root Tests; Error Correction Model;

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  1. Bahmani-Oskooee, Mohsen & Mohtadi, Hamid & Shabsigh, Ghiath, 1991. "Exports, growth and causality in LDCs : A re-examination," Journal of Development Economics, Elsevier, vol. 36(2), pages 405-415, October.
  2. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  3. Kavoussi, Rostam M., 1984. "Export expansion and economic growth : Further empirical evidence," Journal of Development Economics, Elsevier, vol. 14(1), pages 241-250.
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  5. Muhammed Islam, 1998. "Export expansion and economic growth: testing for cointegration and causality," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 415-425.
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  7. 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.
  8. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
  9. Lopez, Ramon, 1991. "How trade and macroeconomic policies affect economic growth and capital accumulation in developing countries," Policy Research Working Paper Series 625, The World Bank.
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  11. Heller, Peter S. & Porter, Richard C., 1978. "Exports and growth : An empirical re-investigation," Journal of Development Economics, Elsevier, vol. 5(2), pages 191-193, June.
  12. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
  13. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
  14. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
  15. Judith A. Giles & Cara L. Williams, 2000. "Export-Led Growth: A Survey of the Empirical Literature and Some Noncausality Results, Part 2," Econometrics Working Papers 0002, Department of Economics, University of Victoria.
  16. Judith A. Giles & Cara L. Williams, 2000. "Export-Led Growth: A Survey of the Empirical Literature and Some Noncausality Results, Part 1," Econometrics Working Papers 0001, Department of Economics, University of Victoria.
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