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Direct and Indirect Causality Between Exports and Economic Output for Bangladesh and Sri Lanka: Horizon Matters

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Author Info
Judith A. Clarke () (Department of Economics, University of Victoria)
Mukesh Ralhan (Department of Economics, University of Victoria)

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Abstract

The extensive body of research that examines for (Granger, 1969) causality from exports to output for developing countries, including Bangladesh and Sri Lanka, using vector autoregressions and/or vector error correction models, is limited in only examining for one-period ahead or direct causality; the exception is in bivariate systems. This (usually unrecognized) focus on one-period causality in multivariate systems has often led to conclusions that exports do not Granger-cause economic output. We show that moving to Granger-causality at longer horizons, in a commonly used multivariate system, leads to bidirectional causality between exports and output, even when there is not one-period causality; the longer horizon causality arises indirectly through one or more of the auxiliary variables.

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Publisher Info
Paper provided by Department of Economics, University of Victoria in its series Econometrics Working Papers with number 0512.

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Length: 27 pages
Date of creation: 15 Jul 2005
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Handle: RePEc:vic:vicewp:0512

Note: ISSN 1485-6441
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Postal: PO Box 1700, STN CSC, Victoria, BC, Canada, V8W 2Y2
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Related research
Keywords: Economic growth Granger causality export-led growth vector autoregressions

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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