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The Causal Relationship between Imports and Economic Growth in the Nine Provinces of South Africa: Evidence from Panel-Granger Causality Tests

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Author Info

  • Tsangyao Chang

    ()
    (Department of Finance, Feng Chia University, Taichung, Taiwan)

  • Beatrice D. Simo-Kengne

    ()
    (Department of Economics, University of Pretoria)

  • Rangan Gupta

    ()
    (Department of Economics, University of Pretoria)

Abstract

This paper examines the causal relationship between imports and growth in nine provinces of South Africa for the period 1996-2011, using panel causality analysis, which accounts for cross-section dependency and heterogeneity across regions. Our empirical results support unidirectional causality running from economic growth to imports for Gauteng, Mpumalanga, North West, and Western Cape; a bi-directional causality between imports and economic growth for KwaZulu-Natal; and no causality in any direction between economic growth and imports for the rest of provinces. This suggests that import liberalisation might not be an efficient strategy to improve provincial economic performance in South Africa. Indeed, provincial imports tend to increase in some provinces as economic growth improves.

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Bibliographic Info

Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201320.

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Length: 19 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:pre:wpaper:201320

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Keywords: Imports; Economic Growth; Dependency and Heterogeneity; Panel Causality Test;

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  1. Pesaran, M.H. & Ullah, A. & Yamagata. T., 2006. "A Bias-Adjusted LM Test of Error Cross Section Independence," Cambridge Working Papers in Economics 0641, Faculty of Economics, University of Cambridge.
  2. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, 07.
  3. Dani Rodrik, 2006. "Understanding South Africa's Economic Puzzles," NBER Working Papers 12565, National Bureau of Economic Research, Inc.
  4. Faridul Islam & Qazi Muhammad Adnan Hye & Muhammad Shahbaz, 2012. "Import-economic growth nexus: ARDL approach to cointegration," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 5(3), pages 194-214, December.
  5. Granger, Clive W. J., 2003. "Some aspects of causal relationships," Journal of Econometrics, Elsevier, vol. 112(1), pages 69-71, January.
  6. Rahman, Mohammad Mafizur & Shahbaz, Muhammad, 2011. "Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan," MPRA Paper 29805, University Library of Munich, Germany, revised 24 Mar 2011.
  7. Pesaran, M.H. & Yamagata. T., 2005. "Testing Slope Homogeneity in Large Panels," Cambridge Working Papers in Economics 0513, Faculty of Economics, University of Cambridge.
  8. repec:eme:jcefts:v:5:y:2012:i:3:pp:194-214 is not listed on IDEAS
  9. Breusch, T.S. & Pagan, A.R., . "The Lagrange multiplier test and its applications to model specification in econometrics," CORE Discussion Papers RP -412, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Awokuse, Titus O., 2007. "Causality between exports, imports, and economic growth: Evidence from transition economies," Economics Letters, Elsevier, vol. 94(3), pages 389-395, March.
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