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Do Exports lead Economic Output in Five Asian Countries? A Cointegration and Granger Causality Analysis

Author

Listed:
  • Jiayi Huang
  • Miguel Ramirez

    () (Department of Economics, Trinity College)

Abstract

This paper examines the relationship between exports and economic output for five major Asian economies using annual data in an expanded data set and employing unit root and cointegration analysis. It employs a Vector Error Correction Model (VECM) that treats all variables in the modified production function as potentially endogenous and then determines via weak exogeneity tests whether some of the key variables can be treated as exogenous (omitted from the system). Johansen cointegration tests find a positive long-run relationship between exports and economic output for the Philippines, Singapore, and Thailand. Cointegration tests find a negative long-run relationship between exports and economic output for India. The Block Granger causality tests and impulse response functions for the Philippines and Singapore find stronger causality from exports to economic output rather than the reverse. Granger causality tests in level form also find significant causality from exports to economic output. No causality exists between exports and economic output in the case of India. Exports seem to promote economic growth in three of the four countries that have cointegrated data, which supports the exports-led growth hypothesis found in some of the extant literature. The paper does not find cointegration for China because the variables are integrated of different orders from I(0) to I(2).

Suggested Citation

  • Jiayi Huang & Miguel Ramirez, 2016. "Do Exports lead Economic Output in Five Asian Countries? A Cointegration and Granger Causality Analysis," Working Papers 1601, Trinity College, Department of Economics.
  • Handle: RePEc:tri:wpaper:1601
    as

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    File URL: http://internet2.trincoll.edu/repec/WorkingPapers2016/WP16-01.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Block Granger Causality Test; Export-led Growth Hypothesis; Johansen Cointegration Test; Modified Production Function; Pantula Procedure; Phillips-Perron Test; Vector Error Correction Model (VECM); Zivot-Andrews single-break unit root test.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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