This study reinvestigates the exportled growth hypothesis for the four largest economies of south asian sub region namely india, pakistan, bangladesh, and sri lanka under multivariate timeseries framework. From these results, the study nullifies the exportled growth hypothesis and postulates that the botswana economy rather follows the growthdriven exports hypothesis gde. Implications for developing asia jesus felipe december 2003 jesus felipe is an economist in the economics and research department of the asian development bank. Further econometric evidence from pakistan nasim shah shirazi1 turkhan ali abdul manap2 abstract this paper reinvestigates export led growth hypothesis for pakistan. If the inline pdf is not rendering correctly, you can download the pdf file here. That paradigm is part of a consensus among economists about the benefits of economic openness. It addresses the problem of specification bias under which previous studies have suffered and focuses on the impact of manufactured and primary exports on the economic growth. This paper examines the validity of the export led growth hypothesis in kenya for the period 1980 to 2011 using time series data.
The hypothesis of exportled growth can be thought of. Introduction there has been, for a long time, a debate regarding the significance of export growth and economic. The study finds that real gdp, real exports, and terms of trade are cointegrated. Exportledgrowth, economic growth, trade liberalization. The great recession has surfaced contradictions that were always inherent in exportled growth and globalization and the global economy now confronts a troubling. It was found that there is one longrun equilibrium correlation between the variables and was also argued that exports granger induce economic growth in both shortrun and longrun giving anevidence for. One reason, as pointed out by bahmanioskooee and alse 1993 is that they have ignored to incorporate the cointegrating properties of exports and output in their testing procedure. An analysis of socalled exportled growth prepared by jie yang1 authorized for distribution by jianhai lin september 2008 abstract this working paper should not be reported as representing the views of the imf. How applicable is exportled growth and importled growth. However, the growthled exports gle hypothesis for tanzania was supported by the results of this study, implying that the government of tanzania needs to. It was found that there is one longrun equilibrium correlation between the variables and was also argued that exports granger induce economic growth in both shortrun and longrun giving anevidence for the export led development theory.
A shortrun causality test for brazil reveals a unidirectional link from export to gdp. A nation pursuing exportled growth seeks to expand its economy by producing goods for sale overseas. Export led growth hypothesis elgh claims that there is a positive relationship between exports and longrun economic growth. The study utilizes annual data for the period 1980 to 2012.
As the outcomes indicated, to recover the economy, croatia should put more emphasis on the development of exporting sectors. Project muse testing the exportled growth hypothesis. The causal relationship between exports and economic. This study examines the exportled growth hypothesis using annual time series data from chile. The results of this study suggest that promoting exports via export promotion policies will contribute to economic growth in jordan. Likewise, dutt and ghosh 1996 found support for the exportled growth hypothesis in half of their sample countries. It holds that the overall growth of countries can be generated not only by increasing the amounts of labour and capital within the economy, but also by expanding exports. The essence of prebischsinger thesis is that the peripheral or ldcs had to export large amounts of their primary products in order to import manufactured goods from the industrially advanced countries. The granger causality test results revealed no any support of the exportled growth elg hypothesis for tanzania. The paper has employed toda and yamamoto 1995 procedure for testing for granger noncausality in the augmented vector autoregressive var methodology to analyze the dynamic relationship between export growth and economic growth in.
Pdf is the exportled growth hypothesis valid for nigeria. In addition, the granger causality test shows that botswanas economy propels exports production. The paper also established that the exportled growth strategy has evolved overtime based on. It is based on the principle of finding a market for something on the international stage. A further examination of the exportled growth hypothesis. Trade theory provides several plausible explanations in favour of this idea. Most of the previous studies are based on either bivariate or trivariate framework. Arguments for and against the exportled growth hypothesis in a nutshell most american economic history books and a great deal of articles published on this issue depict the napoleonic war era as a period of prosperity and growth for the. Exportoriented industrialization was particularly characteristic of the development of the national economies of the asian tigers. In matters of economic development, the last 40 or so years have been dominated by what has come to be known as exportled growth or export promotion strategies for industrialization. Three major and rather different interpretations have been provided in the literature on the meaning of exportled growth. A cointegration and causality approach johnson atan ph.
D1, felix obioesio department of economics, university of uyo, nigeria. In accordance with the results, we found evidence supporting the exportled growth hypothesis in croatia. Exportled growth is a policy strategy and a process by which a country aims at accelerating its rate of economic growth by relying upon an expansion of its exports. The views expressed in this working paper are those of the authors and do not necessarily represent those of the imf or imf policy. Empirical results supportthe export led growth hypothesis in zimbabwe and reveal that a longrun relationship exists between exports and export gdp and that the direction of relationship runs from nonexports to export gdp non in both the shortrun. In romers model the output level of an individual firm depends not only on its stock of capital, but on the economys capital stock. This consensus has been used to justify globalization. Realising the great importance of exportpromotion, economists and policymakers are trying to ascertain the role that exports can play in the growth strategy of ldcs like india.
The paper has employed cointegration and multivariate granger causality developed by toda and yamamoto 1995 to study the longrun and short. Evidence shows that out of 71 socalled exportled growth episodes, only 37 of them are consistent with the exports driving growth hypothesis. A further examination of the exportled growth hypothesis christian dreger dierk herzer 1 abstract. Exportled growth financial definition of exportled growth. In this paper the turkish exportled growth hypothesis is examined from the trade liberalisation process initiated in 1980. Its objective is to derive several growthrelated benefits from export expansion, such as providing employment to its hitherto unemployed and underemployed resources, higher rate of. It is essential to verify these hypothesis so as that proper policies may be formulated to help place the economy on a path of development and maintainable growth.
A significant concern with this latter model is that it may risk turning global growth into a zerosum game. The question is whether the sharp economic growth that the chinese economy has experienced is another case of exportled growth due to the opendoor policy or whether, on the contrary, this growth has been caused by high domestic savings. Dierk herzer abstract this paper challenges the common view that exports generally contribute more to gdp growth than a pure change in export volume, as the exportled growth hypothesis predicts. Johansen cointegration and granger causality tests are employed to investigate the longrun relationship and causality between exports and economic growth respectively. The evidence suggests longrun bidirectional causality between real exports and real gdp. Is the exportled growth hypothesis valid for nigeria. As a result, the major purpose of including the export and import. According to the export led growth hypothesis, exports being the major source of economic growth have many theoretical justifications. Hong kong, south korea, taiwan, and singapore in the postworld war ii period. Exportled growth hypothesis elgh claims that there is a positive relationship between exports and longrun economic growth. This can happen if one countrys export growth comes by poaching of domestic demand elsewhere or by displacing exports of other countries. According to its advocates, exports can perform as an engine. Xu 1996 found support for export led growth in 17 out of 32 develop.
The hypothesis of export led growth elg ass erts exports as a development approach in order to enhance the productivity of an economy targeting big international mark ets. This paper challenges the common view that exports generally contribute more to gdp growth than a pure change in export volume, as the exportled growth hypothesis predicts. Evidence of developing country crowdingout abstract over the last two decades there has been a dramatic shift in the stance of development policy with importsubstitution being replaced by the exportled growth. According to the so called exportled growth hypothesis export activity leads economic growth. The deterioration of terms of trade has been a major inhibitory factor in the growth of the ldcs. The paper also reveals that imports plays no significant role in exports in the longrun and vice versa. The granger nocausality procedure developed by toda and yamamoto 1995 was applied to test the causal link between real export growth and real industrial output growth. Likewise, dutt and ghosh 1996 found support for the export led growth hypothesis in half of their sample countries. Thus, the result that export causes growth render support to the exportled growth hypothesis in accordance with a large body of previous research on both industrial and developing countries. The hypothesis of exportled growth is tested using annual time series data for australia. The model in this paper, however, shows that the nontradable sector may also generate high economic growth together with high export growth. Strategy of exportled growth india economics discussion. Palley 2003 expresses concern over the fact that export led model may risk turning global growth into a zerosum game. First, in keynesian theory more exports generate more income growth through foreign exchange multiplier 1 in the short run.
Exportled growth is an economic approach that many developing nations attempt to put in place to modernize their societies and increase standards of living. Engle and granger 1987 show that when two variables. Successfully executed, this strategy generates a flow of money from abroad that the country can then use to strengthen its domestic economy and raise living standards. Article pdf available in research journal of economics and business studies 22. The export led growth hypothesis, advocates that export growth is key in enhancing economic growth yet no consensus has been reached on the causal relationship between the two. Pdf export led growth hypothesis nasim shah shirazi. Abstract the basic theorizing of the elgh is that countries can record significant levels of growth if there could be expansion in the export. Applying panel cointegration techniques to a production function. The exportled growth hypothesis elgh postulates that export expansion is one of the main determinants of growth. On the exportled growth hypothesis for the little dragons. This paper empirically investigates the exportled growth hypothesis for costa rica. The earliest contributions, influenced by the economic history of temperatezone lands originally settled by european migrant labor and capital caves, 1966, p. Also learn about why this policy is not suitable for india. The analysis reveals that both exports and the gdp series in log levels have unit roots but they do not.
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