Export‐led Growth and Import Compression: Further Time Series Evidence From LDCs

Abstract

This paper conducts tests of the export-led growth and the import-compression hypotheses for four less developed countries (LDCs) ± India, Nigeria, Fiji and Papua New Guinea (PNG). Based on Johansen's multiple cointegration test preceded by unit root tests, we test for cointegration between real output, exports and imports. Non-rejection of cointegration between the variables excludes the possibility of Granger non-causality and suggests at least one way Granger causality. Real output, exports and imports are found to be cointegrated in two of the countries and the resulting errorcorrection models suggest that Granger causality runs from exports and imports to real output in these cases. Exogeneity tests are conducted for exports with respect to real output. However, while the assumption of weak exogeneity is validated in two of the countries, the null hypothesis of super exogeneity is rejected. The test results therefore cast doubts on policy recommendations for the LDCs based on the export-led growth hypothesis.

Exports, imports and economic growth in South Korea and Japan: a tale of two economies

“…Subsequently, a number of studies have adopted this revised methodology (Marin, 1992;Dutt and Ghosh, 1996;Rahman and Mustafa, 1997;Islam, 1998;Ekanayake, 1999;Anoruo and Ramchander, 2000;Chandra, 2004 and2005;Thangavelu and Rajaguru, 2004). Furthermore, of particular significance, several previous studies adopt a multivariate approach using import growth as an additional explanatory variable (Riezman et al, 1996;Asafu-Adjaye and Chakraborty, 1999;Thangavelu and Rajaguru, 2004). Hence, it is within this established body of literature that our study is located.…”

“…This is potentially significant since the import-led growth hypothesis indicates that export growth relieves the foreign exchange constraint, allowing capital and intermediate inputs to be imported to boost domestic production (Asafu-Adjaye and Chakraborty, 1999). Indeed, a number of previous studies (Riezman et al, 1996;Asafu-Adjaye and Chakraborty, 1999;Thangavelu and Rajaguru, 2004) include imports as an additional variable when examining the causal relationship between exports and economic growth whereby failure to account for its role could produce misleading results in the analysis of the relationship between export growth and output growth. Thirdly, this paper seeks to investigate the causality between both real exports and real imports in relation to real GDP using more recent techniques in terms of Johansen's multivariate cointegration framework.…”

The Causal Relationship between Exports, Imports and Economic Growth in Palestine

“…Generally, results from previous studies varies between in-favour and not in-favour of four main hypotheses: Export-Led Growth (ELG), Growth-Led Export (GLE), Import-Led Growth (ILG) and Growth-Led Import (GLI). More specifically, many empirical studies argue that export growth and openness to foreign countries is an important determinate of economic growth (see, Awokuse 2007;Asafu-Adjaye and Chakraborty 1999). However, empirical support for GLE hypothesis is relatively stronger (Ghartey 1993;Kubo 2011).…”

Simultaneous estimation of income and price elasticities of export demand, scale economies and total factor productivity growth for Brazil

“…Similarly, Levine and Renelt (1992), and Wacziarg (2001) found that the major channel for trade and growth is investment. In line with that idea, recent timeseries literature found that the causality going from exports to output growth is stronger than that going vice versa (see Riezman et al, 1996;Islam, 1998;Asafu-Adjaye and Chakraborty, 1999;Krishna et al, 2003).…”