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The Trade–Growth Relationship in Israel Revisited: Evidence from Annual Data, 1960-2004

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  • Abo-Zaid, Salem

Abstract

The topic of trade effects on economic growth has been usually controversial. Former empirical evidence linking trade to growth in Israel has been mixed and inconclusive either. This study reexamines the role of trade in Israel by testing for cointegration and causality from both exports and imports to output and total factor productivity over the period 1960-2004. The results suggest that both output and TFP are positively long-run correlated with exports and imports. The Granger causality tests indicate positive effects of exports on both output and TFP, where imports influence output only. In addition, physical capital has also been found to be Granger-caused by imports. This may suggest that the impact of imports on output is through the accumulation of physical capital and/or improvement in TFP over time.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26344.

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Date of creation: 31 Oct 2010
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Handle: RePEc:pra:mprapa:26344

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Keywords: Trade-growth relationships; Cointegration; Causality ; Israeli economy;

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