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The Engine of Growth or Its Handmaiden? A Time-Series Assessment of Export-Led Growth

  • Raymond Riezman

    (University of Iowa)

  • Charles Whiteman
  • Peter M. Summers

This paper presents an analysis of time-series data for the countries in the Summers-Heston (1991) data set, in an attempt to ascertain the evidence for or against the export-led growth hypothesis. We find that standard methods of detecting export-led growth using Granger causality tests may give misleading results if imports are not included in the system being analysed. For this reason, our main statistical tool is the measure of conditional linear feedback developed by Geweke (1984), which allows us to examine the relationship between export growth and income growth while controlling for the growth of imports. These measures have two additional features which make them attractive for our work. First, they go beyond mere detection of evidence for export-led growth, to provide a measurement of its strength. Second, they enable us to determine the temporal pattern of the response of income to exports. In some cases export-led growth is a long run phenomenon, in the sense that export promotion strategies adopted today have their strongest effect after 8 to 16 years. In other cases the opposite is true; exports have their greatest influence in the short run (less than 4 years). We find modest support for the export- led growth hypothesis, if “support” is taken to mean a unidirectional causal ordering. Conditional on import growth, we find a causal ordering from export growth to income growth in 30 of the 126 countries analysed; 25 have the reverse ordering. Using a weaker notion of “support”--stronger conditional feedback from exports to income than vice versa, 65 of the 126 countries support the export- led growth hypothesis, although the difference in strength is small. Finally, we find that for the “Asian Tiger” countries of the Pacific Rim, the relationship between export growth and output growth becomes clearer when conditioned on human capital and investment growth as well as import growth.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 9602002.

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Date of creation: 14 Feb 1996
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Handle: RePEc:wpa:wuwpge:9602002
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  1. Ahmad, Jaleel & Kwan, Andy C. C., 1991. "Causality between exports and economic growth : Empirical evidence from Africa," Economics Letters, Elsevier, vol. 37(3), pages 243-248, November.
  2. Kunst, Robert M. & Marin, Dalia, 1989. "On Exports and Productivity: A Causal Analysis," Munich Reprints in Economics 3113, University of Munich, Department of Economics.
  3. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
  4. Riezman, R.G. & Whiteman, C.H., 1991. "World Business Cycles," Working Papers 91-26, University of Iowa, Department of Economics.
  5. Chow, Peter C. Y., 1987. "Causality between export growth and industrial development : Empirial evidence from the NICs," Journal of Development Economics, Elsevier, vol. 26(1), pages 55-63, June.
  6. Bahmani-Oskooee, Mohsen & Mohtadi, Hamid & Shabsigh, Ghiath, 1991. "Exports, growth and causality in LDCs : A re-examination," Journal of Development Economics, Elsevier, vol. 36(2), pages 405-415, October.
  7. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  8. Tyler, William G., 1981. "Growth and export expansion in developing countries : Some empirical evidence," Journal of Development Economics, Elsevier, vol. 9(1), pages 121-130, August.
  9. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  10. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
  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. Serletis, Apostolos, 1992. "Export growth and Canadian economic development," Journal of Development Economics, Elsevier, vol. 38(1), pages 133-145, January.
  13. Peter Kugler, 1991. "Growth, exports and cointegration: An empirical investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(1), pages 73-82, March.
  14. Marin, Dalia, 1992. "Is the Export-Led.Growth Hypothesis Valid for Industrialized Countries?," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 678-88, November.
  15. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  16. Jung, Woo S. & Marshall, Peyton J., 1985. "Exports, growth and causality in developing countries," Journal of Development Economics, Elsevier, vol. 18(1), pages 1-12.
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