Exactly what is the link between export and growth in Taiwan? new evidence from the Granger causality test

Abstract

We assess the validity of the Export-led Growth (ELG) and the Growth-driven Export (GDE) hypotheses in Taiwan by testing for Granger causality using the vector error correction model (VECM) and the bounds testing methodology developed by Pesaran {\it et al.} (PSS, 2001). The empirical results substantiate that a long-run level equilibrium relationship exists among exports, output, terms of trade and labor productivity of the model and that Granger causal flow between real exports and real output is reciprocal. Thus, our results attest to the advantage of the export-led growth strategy for continuous growth in Taiwan.

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