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Testing Finance-Led, Export-Led and Import-Led Growth Hypotheses on Four Sub-Saharan African Economies

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  • Evans, Olaniyi
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    Abstract

    This study carries out an empirical examination of the finance-led, export-led and import-led growth hypothesis for four of the largest Sub-Saharan African economies namely South Africa, Nigeria, Ghana and Kenya. Within a multivariate Vector-Auto Regressive (VAR) framework, the concept of Granger causality is employed to determine the direction of causation between exports and output, duly taking into account the stationarity properties of the time series data. With further substantiation from impulse response function and variance decomposition, the empirical evidence shows (i) finance-led, export-led and import-led growth in South Africa and Kenya, (ii) finance-led and imports-led growth in Nigeria, and (iii) only finance-led growth in Ghana. These four Sub-Saharan African nations, with the help of reforms, have experienced expanding exports, increased financial development and accelerated GDP growth rates. Yet, these have yielded varying degrees of success. The agenda for economic growth is a long one in Sub-Saharan Africa. Reforms would require preconditions in the wider economic and political environment, without which they will be ineffective or even counterproductive.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52460.

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    Date of creation: Dec 2013
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    Handle: RePEc:pra:mprapa:52460

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    Keywords: exports; Sub-Saharan African; Granger causality; multivariate Vector-Auto Regressive (VAR); impulse response function; variance decomposition; finance-led; export-led and import-led growth hypothesis;

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    1. Ramos, Francisco F. Ribeiro, 2001. "Exports, imports, and economic growth in Portugal: evidence from causality and cointegration analysis," Economic Modelling, Elsevier, vol. 18(4), pages 613-623, December.
    2. repec:eme:jcefts:v:5:y:2012:i:3:pp:194-214 is not listed on IDEAS
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    12. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    13. Marin, Dalia, 1992. "Is the Export-led Growth Hypothesis Valid for Industrialized Countries?," Munich Reprints in Economics 3112, University of Munich, Department of Economics.
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