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On the export-led growth hypothesis: the econometric evidence from China

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  • Jordan Shan
  • Fiona Sun

Abstract

The export-led growth hypothesis is tested by estimating an augmented growth equation on the basis of times series data from China. The Granger no-causality procedure developed by Toda and Yamamoto (Journal of Econometrics, 66, 1995) was applied to test the causality link between exports and economic growth in a VAR system. Three distinct features in this paper stand out compared to earlier studies on China: first, we have gone beyond the traditional two-variable relationship by building a VAR model in the production function context to avoid a possible specification bias; second, we follow Riezman, Whiteman and Summers (Empirical Economics, 21, 1996) to test the export-led growth hypothesis while controlling for the growth of imports to avoid producing a spurious causality result; third, we test the sensitivity of causality test results under different lag structures along with the choice of optimal lags; in particular, the methodology developed by Toda and Yamamoto (1995) is expected to improve the standard F -statistics in the causality test process. The results indicate a bidirectional causality between exports and real industrial output in China in the 1987-1996 period. The export-led growth hypothesis, defined as a unidirectional causal ordering from exports to output, is therefore rejected in the case of China despite the positive contribution of exports on China's real output.

Suggested Citation

  • Jordan Shan & Fiona Sun, 1998. "On the export-led growth hypothesis: the econometric evidence from China," Applied Economics, Taylor & Francis Journals, vol. 30(8), pages 1055-1065.
  • Handle: RePEc:taf:applec:v:30:y:1998:i:8:p:1055-1065
    DOI: 10.1080/000368498325228
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    1. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
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