Abstract
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 analyzed. 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 meredetection of evidence for export-led growth, to provide a measurement of itsstrength. 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 eight to 16 years. In other cases the opposite is true; exports have their greatest influence in the short run (less than four 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 analyzed; 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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We are grateful to J. David Richardson, Narayana Kocherlakota, Tin Nguyen, two anonymous referees, and seminar participants at the 1992 Midwest International Economics meetings, the University of Adelaide, and the 1994 conference of the Economics Society of Australia, for helpful comments and discussions. The analysis of the Penn-World Table (Mark 5.5) was greatly simplified by the spreadsheet macros and templates developed by Dr. Sailesh K. Tanna of the Coventry Business School. Riezman and Whiteman acknowledge support from the National Science Foundation, under grants SES 90-23056 and SES 89-22419, respectively. Any remaining errors are our own.
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Riezman, R.G., Whiteman, C.H. & Summers, P.M. The engine of growth or its handmaiden?. Empirical Economics 21, 77–110 (1996). https://doi.org/10.1007/BF01205495
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DOI: https://doi.org/10.1007/BF01205495