Mexico and brazil over the past three decades, appeared to provide empirical support for exportled. An analysis of socalled exportled growth prepared by jie yang1 authorized for distribution by jianhai lin september 2008 abstract this working paper should not be reported as representing the views of the imf. Kaldors hypothesis was that growth of per capita output is determined by the regions ability to exploit economies of scale and the type of activity in which it specialises. They used the technique granger causality to test the direction of the causality between export and economic growth. It is essential to verify these hypothesis so as that proper policies may be formulated to help place the economy on a path of development and maintainable growth. Exportledgrowth, economic growth, trade liberalization. The rise and fall of exportled growth levy economics institute. This paper challenges the common view that exports generally contribute more to gdp growth than a pure change in export volume, as the exportled growth hypothesis predicts. The evidence suggests longrun bidirectional causality between real exports and real gdp. Exportled growth financial definition of exportled growth. The study uses three measures of export namely, total export, oil export and non. Time series data ranging from 1970 to 2009 was used and the study employs unit root testing, cointegration analysis and var granger causalityexogeneity wald tests to analyze annual time series data from nigeria.
Strategy of exportled growth india economics discussion. The exportled growth hypothesis elgh postulates that export expansion is one of the main determinants of growth. Export expansion will increase productivity by offering greater economies of. Empirical results supportthe export led growth hypothesis in zimbabwe and reveal that a long run relationship exists between exports and export gdp and that the direction of relationship runs. This paper traces the rise of exportled growth as a development paradigm and argues. This consensus has been used to justify globalization. A further examination of the exportled growth hypothesis econstor. Interestingly, metaanalysis has emerged as a methodological.
New evidence and implications abstract previous studies on economic growth have shown that countries that relied on exports to propel their economies have been successful in achieving robust economic growth. A further examination of the exportled growth hypothesis. Using an exportaugmented neoclassical production function, the validity of the exportled growth hypothesis for mexico is also tested over the period 19602003. It is known as the exportled growth elg hypothesis. According to its advocates, exports can perform as an engine. The objective of this study is to reinvestigate the exportled growth hypothesis for asias four little dragons using cointegration and rolling causality analyses. Pdf export led growth hypothesis nasim shah shirazi. This idea has become a dominant discourse in economic development literature. This paper examined the export led growth hypothesis for ethiopia for the. The great recession has surfaced contradictions that were always inherent in exportled growth and globalization and the global economy now confronts a troubling. The exportled growth elg hypothesis postulates export expansion as one of the main determinants of economic growth. In contrast to the exportled growth hypothesis, scholars such as bhagwati 1988. The first is the neoclassical exportled growth hypothesis.
Equally importantly, the increase in exports enables a higher level of import absorption to be accommodated so that there is no. The export led growth hypothesis elgh postulates that export expansion is one of the key determinants of economic growth. The study finds that real gdp, real exports, and terms of trade are cointegrated. That paradigm is part of a consensus among economists about the benefits of economic openness. Exportled growth, growthdriven export 75 consider at most two countries, but the most extensive studies, afxentiou and serletis 1991, pomponio 1996 and riezman et al. Successfully executed, this strategy generates a flow of money from abroad that the country can then use to strengthen its domestic economy and raise living standards. China as a preeminent example of exportled growth has been successful with the policy since 1978 because of its access to negotiations through the world trade organization wto, an abundance of cheap labor, and an aggressive internal program of industrialization.
The results of this study suggest that promoting exports via export promotion policies will contribute to economic growth in jordan. Employing both bivariate exports and gdp and trivariate exports, gdp and exchange rate models, the study finds that exports and gdp are cointegrated for all the four economies, implying that there is a long run. Introduction there has been, for a long time, a debate regarding the significance of export growth and economic growth in both developed and developing countries. There is a considerable literature that investigates the link and causation between exports and economic growth, but the conclusions still. As exports rise, they inject additional income into the domestic economy and increase total demand for domestically produced output see export multiplier. Unity university is export led growth valid for ethiopia.
The staple theory of primaryexportled growth in order to integrate both historical and theoretical aspects of the export promotion hypothesis, we will adopt the staple theory of primaryexportled growth as the framework of analysis. The estimation results support the exportled growth hypothesis for chile and at the. The analysis reveals that both exports and the gdp series in log levels have unit roots but they do not. Applying panel cointegration techniques to a production function. From these results, the study nullifies the export led growth hypothesis and postulates that the botswana economy rather follows. The causal relationship between exports and economic. It holds that the overall growth of countries can be generated not only by increasing the amounts of labour and capital within the economy, but also by expanding exports. Thus, manufacturing reaps greater benefit gains than landbased activity because it has greater scope for productivity gains.
Thus, the hypothesis predicts that the rate of export growth will cause economywide productivity gains. Evidence of developing country crowdingout abstract over the last two decades there has been a dramatic shift in the stance of development policy with importsubstitution being replaced by the exportled growth. The export led growth hypothesis, advocates that export growth is key in enhancing economic growth yet no consensus has been reached on the causal relationship between the two. The conclusions are fairly mixed and often contradict one another.
Econometric analysis of the exportled growth hypothesis. The export led growth hypothesis claims that export is capable of affecting economic growth by encouraging the domestic producers to use better production techniques and to be more competitive in the world market. Exportled growth hypothesis 475 growth for 9 developing countries and found strong support for the exportled growth hypothesis for all the countries included in their sample. An empirical examination of the exportled growth hypothesis in turkey1 sami taban, ismail aktar abstract the exportled growth elg hypothesis postulates a causal connection between export and growth.
In the next section, we provide an overview of the empirical literature of the exportled growth hypothesis for african countries. It reflects the view that export oriented policies help to stimulate economic growth. An exportled growth hypothesis which states that exports are keys to promoting economic growth provides one of the answers to this fundamental question. Pdf is the exportled growth hypothesis valid for nigeria. The hypothesis of exportled growth is tested using annual time series data for australia. The granger nocausality procedure developed by toda and yamamoto 1995 was applied to test the causal link between real export growth and real industrial output growth. The views expressed in this working paper are those of the authors and do not necessarily represent those of the imf or imf policy. Exportexpansion can be a catalyst for output growth both directly, as a component of aggregate output, as well as. Donya brown research and economic programming division. In addition the study, found unidirectional short run causality from exports and imports to economic growth. Next we combine equation 2 with equation 1 and obtain. Exportled growth implies opening domestic markets to foreign. This paper examines the validity of the exportled growth elg hypothesis in the context of the jamaican economy, among other selected latin american and caribbean countries.
The role of the exchange rate, money, and government expenditure from korea. An exportled growth strategy is one where a country seeks economic development by opening itself up to international trade. Another plausible hypothesis is that negative causality runs from output growth to export growth. The estimated results confirmed the importled growth hypothesis for nigeria, guinea, and liberia, a tradeled growth hypothesis for the gambia and.
But southsouth trade is partly picking up the slack. A significant concern with this latter model is that it may risk turning global growth into a zerosum game. Therefore, economic growth will promote the growth of exports. This study considers botswanas mineral exports production from 2003q1 to 2012q4 and relates each export. Middleincome countries are driving export diversification of lowincome countries. While chinas growth rate continues at a high level, its very low consumption rate per. Exportled growth is an economic strategy that is also used by islamic countries in asean. An econometric analysis of export led growth hypothesis. Revisited exportled growth hypothesis sage journals.
A note on the exportled growth hypothesis 295 describes the methodology and data while section three presents the empirical results and section four concludes. The opposite of an exportled growth strategy is import substitution. Exportled development, employment and gender in the era. Engle and granger 1987 show that when two variables. Larger exports will contribute to the stock of knowledge and human capital in the economy thereby benefiting all firms. One reason, as pointed out by bahmanioskooee and alse 1993 is that they have ignored to incorporate the cointegrating properties of exports and output in their testing procedure. The standard exportled growth model was first formalized by feder 1982, where it was postulated that exports have a positive effect on gdp growth due to the. The basic exportled growth hypothesis posits that the key aspect in the process of fast but sustainable economic growth is boosting the level of exported commodities in an economy. As a result, the major purpose of including the export and import. It also documents, from a gender perspective, the experiences and impacts of the exportled development strategy on employment and labour in. Kunst and marin 1989 find that the growthdriven export hypothesis cannot be rejected for austria. This paper examines the validity of the export led growth hypothesis in kenya for the period 1980 to 2011 using time series data.
In a recent paper, thomas palley 2002 has argued that after several decades of being presented as the optimal growth strategy, the exportled growth elg model that the east asian countries followed has ultimately given in and even harmed the growth prospects of developing countries. The intraindustry trade is raised by exports which helps the country to integrate the global market and causes to reduce the. This study investigates elg hypothesis using quarterly time series data for the period 1980. Developing countries may be moving toward a new version of exportled growth.
Empirical methodology and data to test for the existence of unit roots and identify the order of integration for each variable, the augmented dickeyfuller hereafter adf test. Realising the great importance of exportpromotion, economists and policymakers are trying to ascertain the role that exports can play in the growth strategy of ldcs like india. Empirical results supportthe export led growth hypothesis in zimbabwe and reveal that a longrun relationship exists between exports and export gdp and that the direction of relationship runs from nonexports to export gdp non in both the shortrun. Also learn about why this policy is not suitable for india. In this article we will discuss about the strategy of exportled growth. Pdf this study aims to prove and analyze the effect of export growth on economic growth in the asean. The model uses quarterly and annual time series data from march 1997 to. Till 1970s, the import substitution policy prevailed in most of the developing countries. Export led models of regional growth economics network. This paper examined the role of export in the economic growth process in nigeria. Against the backdrop of exportoriented policy reforms to mexicos trade regime in the mid 1980s, the present study undertakes a case study of economic growth in mexico. The exportled growth hypothesis is tested using quarterly time series data for hong kong, korea, and taiwan and by constructing a vector autoregression var model. A nation pursuing exportled growth seeks to expand its economy by producing goods for sale overseas.
Likewise, dutt and ghosh 1996 found support for the exportled growth hypothesis in half of their sample countries. A further examination of the exportled growth hypothesis christian dreger dierk herzer 1 abstract. Journal of international development 23 2, 220a239. If we look back at history, it can be seen that germany is the first country to adopt export led growth idea in 1950s and japan is the second 1960s country. Exportoriented industrialization eoi sometimes called export substitution industrialization esi, export led industrialization eli or exportled growth is a trade and economic policy aiming to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage. How applicable is exportled growth and importled growth.