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Exports, Growth and Causality: An Application of Co-integration and Error-correction Modelling

Author

Listed:
  • Ashfaque H. Khan

    (Pakistan Institute of Development Economics, Islamabad.)

  • Afia Malik

    (Pakistan Institute of Development Economics, Islamabad.)

  • Lubna Hasan

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

The relationship between export expansion and economic growth has been examined extensively during the last two decades in the context of the suitability of the alternative development strategies. The decade of the 1970s witnessed an emerging consensus in favour of export promotion as development strategy. Such a consensus was based on the following facts. First, higher export earnings working through alleviating foreign exchange constraints may enhance the ability of a developing country to import more industrial raw materials and capital goods, which, in turn, may expand its productive capacity. Secondly, the competition in export markets abroad may lead to the exploitation of economies of scale, greater capacity utilisation, efficient resource allocation, and an acceleration of technical progress in production. Thirdly, given the theoretical arguments mentioned above, the observed strong correlation between exports and economic growth was interpreted as empirical evidence in favour of export promotion as a development strategy.

Suggested Citation

  • Ashfaque H. Khan & Afia Malik & Lubna Hasan, 1995. "Exports, Growth and Causality: An Application of Co-integration and Error-correction Modelling," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 1001-1012.
  • Handle: RePEc:pid:journl:v:34:y:1995:i:4:p:1001-1012
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    References listed on IDEAS

    as
    1. Balassa, Bela, 1978. "Exports and economic growth : Further evidence," Journal of Development Economics, Elsevier, vol. 5(2), pages 181-189, June.
    2. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
    3. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    4. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
    5. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    6. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    7. Kavoussi, Rostam M., 1984. "Export expansion and economic growth : Further empirical evidence," Journal of Development Economics, Elsevier, vol. 14(1), pages 241-250.
    8. Jung, Woo S. & Marshall, Peyton J., 1985. "Exports, growth and causality in developing countries," Journal of Development Economics, Elsevier, vol. 18(1), pages 1-12.
    9. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
    10. Fosu, Augustin Kwasi, 1990. "Exports and economic growth: The African case," World Development, Elsevier, vol. 18(6), pages 831-835, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Qazi Masood Ahmed & Mohammad Sabihuddin Butt & Shaista Alam, 2000. "Economic Growth, Export, and External Debt Causality: The Case of Asian Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 591-608.
    2. Aurangzeb, 2003. "Trade, Investment and Growth Nexus in Pakistan: An Application of Cointegration and Multivariate Causality Test," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 8(1), pages 119-137, Jan-June.
    3. Muhammad AFZAl, 2012. "Do Structural Transformation And Trade Liberalisation Cause Economic Growth In Pakistan?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(1).
    4. Muhammad Arshad Khan & Abdul Qayyum, 2007. "Trade Liberalisation, Financial Development and Economic Growth," Trade Working Papers 22204, East Asian Bureau of Economic Research.
    5. Ashfaque H. Khan, 1998. "The Experience of Trade Liberalisation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(4), pages 661-685.
    6. Ejaz Ghani & Musleh ud Din & Afia Malik, 2017. "An Assessment of Pakistan's Export Performance and the Way Forward," Working Papers id:12173, eSocialSciences.
    7. Saima Siddiqui & Sameena Zehra & Sadia Majeed & Muhammad Sabihuddin Butt, 2008. "Export-Led Growth Hypothesis in Pakistan: A Reinvestigation Using the Bounds Test," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 13(2), pages 59-80, Jul-Dec.
    8. Mohammad Akbar & Zareen F. Naqvi, 2001. "External Market Conditions, Competitiveness, Diversification, and Pakistan’s Export Performance," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 871-884.
    9. Akmal, Muhammad Shahbaz & Ahmad, Khalil & Ali, Muhammad, 2009. "Exports-Led Growth Hypothesis in Pakistan: Further Evidence," MPRA Paper 16043, University Library of Munich, Germany.
    10. Nasim Shah Shirazi & Turkhan Ali Abdul Manap, 2005. "Export-Led Growth Hypothesis: Further Econometric Evidence From South Asia," The Developing Economies, Institute of Developing Economies, vol. 43(4), pages 472-488, December.
    11. Musleh-Ud Din, 2004. "Exports, Imports, and Economic Growth in South Asia: Evidence Using a Multivariate Time-series Framework," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(2), pages 105-124.
    12. Nasim Shah Shirazi & Turkhan Ali Abdul Manap, 2004. "Exports and Economic Growth Nexus: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 563-581.
    13. Mohsin Hasnain Ahmad & Shaista Alam & Mohammad Sabihuddin Butt, 2003. "Foreign Direct Investment, Exports, and Domestic Output in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(4), pages 715-723.
    14. Muhammad Arshad Khan & Ayaz Ahmed, 2012. "Modelling Trade, Investment, Growth and Liberalisation: Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 187-208.
    15. Afia Malik & Ejaz Ghani & Musleh ud Din, 2017. "An Assessment of Pakistan’s Export Performance and the Way Forward," PIDE-Working Papers 2017:153, Pakistan Institute of Development Economics.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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