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

Listed author(s):
  • Jiayi Huang
  • Miguel Ramirez

    ()

    (Department of Economics, Trinity College)

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).

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File URL: http://internet2.trincoll.edu/repec/WorkingPapers2016/WP16-01.pdf
File Function: First version, 2016
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Paper provided by Trinity College, Department of Economics in its series Working Papers with number 1601.

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Length: 24 pages
Date of creation: Jun 2016
Handle: RePEc:tri:wpaper:1601
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Web page: http://www.trincoll.edu/Academics/MajorsAndMinors/Economics/Pages/default.aspx

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  1. Titus Awokuse, 2005. "Exports, economic growth and causality in Korea," Applied Economics Letters, Taylor & Francis Journals, vol. 12(11), pages 693-696.
  2. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  3. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
  4. Subrata Ghatak & Chris Milner & Utku Utkulu, 1997. "Exports, export composition and growth : cointegration and causality evidence for Malaysia," Applied Economics, Taylor & Francis Journals, vol. 29(2), pages 213-223.
  5. Justin Yifu Lin, 2013. "New structural economics: the third wave of development thinking," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 27(2), pages 1-13, November.
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  7. Muhammed Islam, 1998. "Export expansion and economic growth: testing for cointegration and causality," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 415-425.
  8. Dolado, Juan J & Jenkinson, Tim & Sosvilla-Rivero, Simon, 1990. " Cointegration and Unit Roots," Journal of Economic Surveys, Wiley Blackwell, vol. 4(3), pages 249-273.
  9. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
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  11. Ram, Rati, 1987. "Exports and Economic Growth in Developing Countries: Evidence from Time-Series and Cross-Section Data," Economic Development and Cultural Change, University of Chicago Press, vol. 36(1), pages 51-72, October.
  12. Balassa, Bela, 1985. "Exports, policy choices, and economic growth in developing countries after the 1973 oil shock," Journal of Development Economics, Elsevier, vol. 18(1), pages 23-35.
  13. Shin, Yongcheol & Schmidt, Peter, 1992. "The KPSS stationarity test as a unit root test," Economics Letters, Elsevier, vol. 38(4), pages 387-392, April.
  14. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
  15. Sae Ran Koh & Jai S. Mah, 2013. "The effect of export composition on economic growth: the case of Korea," Journal of Developing Areas, Tennessee State University, College of Business, vol. 47(1), pages 171-179, January-J.
  16. Subrata Ghatak & Stephen Price, 1997. "Export composition and economic growth: Cointegration and causality evidence for India," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(3), pages 538-553, September.
  17. 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.
  18. Thornton, John, 1996. "Cointegration, causality and export-led growth in Mexico, 1895-1992," Economics Letters, Elsevier, vol. 50(3), pages 413-416, March.
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