A test for the export-led growth hypothesis in possibly integrated vector autoregressions

Abstract

This article re-examines the direction of causation between exports and output by testing for Granger noncausality under the framework of four-variable vector autoregression. Both the methodologies developed in Toda and Phillips (1993 Thornton, J. 1997. Exports and economic growth: evidence from 19th century Europe. Economics Letters, 55: 235–40. [Crossref], [Web of Science ®] , [Google Scholar], 1994 Toda, HY and Phillips, PCB. 1993. Vector autoregressions and causality. Econometrica, 61: 1367–93. [Crossref], [Web of Science ®] , [Google Scholar]) and Toda and Yamamoto (1995 Toda, HY and Phillips, PCB. 1994. Vector autoregressions and causality: a theoretical overview and simulation study. Econometric Reviews, 13: 259–85. [Taylor & Francis Online] , [Google Scholar]) are applied. A country is recommended to enforce export promotion policies as its appropriate development strategy, if its manufacturing sector takes up a relatively large share.

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