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Trade and GDP Growth: Causal Relations in the United States and Canada

Author

Listed:
  • George K. Zestos

    () (Department of Economics and Finance, Christopher Newport University)

  • Xiangnan Tao

    () (Department of Management and Economics, Jiangnan University)

Abstract

Causal relations between the growth rates of exports, imports, and the GDP of Canada and the United States are studied using the vector error correction (VEC) model. Utilizing time-series annual data (1948–1996), Granger causality tests are performed within the framework of the VEC model. Bidirectional causality is supported for Canada from the foreign sector to GDP and vice versa. A weaker relationship between the foreign sector and GDP is statistically supported for the United States. These results are also supported by comparing the total trade (exports plus imports) shares to GDP of the two neighboring economies. The Granger causality tests suggest that Canada is a more open economy than the United States and more trade dependent.

Suggested Citation

  • George K. Zestos & Xiangnan Tao, 2002. "Trade and GDP Growth: Causal Relations in the United States and Canada," Southern Economic Journal, Southern Economic Association, vol. 68(4), pages 859-874, April.
  • Handle: RePEc:sej:ancoec:v:68:4:y:2002:p:859-874
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    Cited by:

    1. Gebre-Mariam, Yohannes Kebede, 2011. "Testing for unit roots, causality, cointegration, and efficiency: The case of the northwest US natural gas market," Energy, Elsevier, vol. 36(5), pages 3489-3500.
    2. Hübler, Michael, 2015. "A Trade Network Theory," Hannover Economic Papers (HEP) dp-553, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    3. Julen Berasaluce & José Romero, 2017. "Economic growth and the external sector: Evidence from Korea, lessons for Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 32(1), pages 95-131.
    4. José Romero, 2015. "Exports, imports, FDI and GDP in Mexico," Serie documentos de trabajo del Centro de Estudios Económicos 2015-01, El Colegio de México, Centro de Estudios Económicos.
    5. Tong, Tingting & Yu, Edward & Roberts, Roland K., 2014. "Dynamics of Transport Infrastructure, Exports and Economic Growth in the United States," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 53(1).
    6. Hübler, Michael, 2016. "A new trade network theory: What economists can learn from engineers," Economic Modelling, Elsevier, vol. 55(C), pages 115-126.
    7. Florencia Médici, 2011. "A Cointegration Analysis on the Principle of Effective Demand in Argentina (1980-2007)," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(61-62), pages 103-137, January -.
    8. bouoiyour, jamal, 2003. "Trade and GDP Growth in Morocco: Short-run or Long-run Causality?," MPRA Paper 28859, University Library of Munich, Germany.
    9. Julen Berasaluce & José Romero, 2015. "Exports, imports, FDI and GDP in the Republic of Korea: 1980-2014," Serie documentos de trabajo del Centro de Estudios Económicos 2015-06, El Colegio de México, Centro de Estudios Económicos.
    10. Chang, Shu-Hwa & Huang, Liang-Chou, 2010. "The nexus of finance and GDP growth in Japan: Do real interest rates matter?," Japan and the World Economy, Elsevier, vol. 22(4), pages 235-242, December.

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