Export expansion and economic growth: testing for cointegration and causality

Abstract

This paper develops a multivariate error-correction model to test the causality between exports and growth in 15 Asian countries, 1967–91. The underlying series are tested as non-stationary in levels but stationary in first differences. The causal factors are cointegrated in five of these countries only. Causality test results indicate that export expansion causes growth in two-third of these countries, corrected for simultaneity between the causal factors. A country with a large public sector, higher level of economic development, and which is less vulnerable to external economic shocks is more likely to reap the benefits of export promotion strategies. The causal inferences are fairly stable over the sample period.

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