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Manufactured Exports And Economic Growth In Egypt: Cointegration And Causality Analysis

  • Neveen M. TORAYEH
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    Although it is widely acknowledged that exports, particularly through manufactured components, play an important role as a potential source of economic growth, the relationship between exports and economic growth is still ongoing. This paper contributes to this controversy using cointegration analysis and Error Correction Model (ECM) test to determine the short and long run causality between manufactured exports and economic growth in Egypt during the period 1980-2008 with particular interest to decompose Egypt's manufactured exports into a number of key industries. The empirical results show that bi-direction long-run causality exists not only between exports of manufactured goods as a whole and economic growth but also in case of few Egyptian export industries like textile products, chemical products, fabricated metal products and food-processing. Furthermore, the short run unidirectional causality from exports of some industries to economic growth is explored. The direction of causality from growth to exports was inferred only in the case of chemical products. The main conclusion is that there is a long run circular causality between manufactured exports and economic growth in Egypt. Therefore, adopting vigorous growth policy is expected to stimulate the manufactured exports. However, the export-led policy seems to be a basic tool toward sustained growth in Egypt. Furthermore, emphasis on the composition of manufactured exports should be considered as a main instrument in the export driving growth policy.

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    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 11 (2011)
    Issue (Month): 1 ()
    Pages:

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    Handle: RePEc:eaa:aeinde:v:11:y:2011:i:1_10
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