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Export-led growth and the Japanese economy: evidence from VAR and directed acyclic graphs

  • Titus Awokuse

This paper explores the causal relationship between real exports and GDP growth in Japan using two recently developed causal modelling approaches. Using Japanese time series, the paper employed the augmented VAR methodology developed by Toda and Yamamoto (1995) to test for Granger non-causality. Then, a more recently developed technique of directed acyclic graphs (DAG) was also used in providing over-identifying restrictions on the innovations from a vector autoregression (VAR) model. In contrast to prior analyses, the application of DAG techniques allows for the examination of both contemporaneous and dynamic causal structure of the exports-productivity nexus. The empirical results reveal that the causal path between exports and GDP growth in Japan is bi-directional. Furthermore, other variables such as capital and foreign output are also significant determinants of productivity growth in Japan.

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 5 ()
Pages: 593-602

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Handle: RePEc:taf:applec:v:38:y:2006:i:5:p:593-602
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  1. Grabowski, Richard & Sharma, Subhash C. & Dhakal, Dharmendra, 1990. "Exports and Japanese economic development," Economics Letters, Elsevier, vol. 32(2), pages 127-132, February.
  2. Boltho, Andrea, 1996. "Was Japanese Growth Export-Led?," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 415-32, July.
  3. Ben-David, Dan & Loewy, Michael B, 1998. " Free Trade, Growth, and Convergence," Journal of Economic Growth, Springer, vol. 3(2), pages 143-70, June.
  4. Hatemi-J, Abdulnasser, 2002. "Export performance and economic growth nexus in Japan: a bootstrap approach," Japan and the World Economy, Elsevier, vol. 14(1), pages 25-33, January.
  5. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
  6. Balassa, Bela, 1978. "Exports and economic growth : Further evidence," Journal of Development Economics, Elsevier, vol. 5(2), pages 181-189, June.
  7. Titus O. Awokuse, 2003. "Is the export-led growth hypothesis valid for Canada?," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 126-136, February.
  8. Swanson, N.R. & Granger, C.W.J., 1994. "Impulse Response Functions Based on Causal Approach to Residual Orthogonalization in Vector Autoregressions," Papers 9-94-1, Pennsylvania State - Department of Economics.
  9. Hausman, Jerry A., 2003. "Triangular structural model specification and estimation with application to causality," Journal of Econometrics, Elsevier, vol. 112(1), pages 107-113, January.
  10. Marin, Dalia, 1992. "Is the Export-led Growth Hypothesis Valid for Industrialized Countries?," Munich Reprints in Economics 3112, University of Munich, Department of Economics.
  11. Hoover,Kevin D., 2001. "Causality in Macroeconomics," Cambridge Books, Cambridge University Press, number 9780521002882, October.
  12. Lutkepohl, Helmut, 1982. "Non-causality due to omitted variables," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 367-378, August.
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