The engine of growth or its handmaiden? A time-series assessment of export-led growth

Raymond G. Riezman, Charles H. Whiteman, Peter M. Summers

Research output: Contribution to journalArticle

107 Citations (Scopus)

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 mere detection of evidence for export-led growth, to provide a measurement of its strength. 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.

Original languageEnglish (US)
Pages (from-to)77-110
Number of pages34
JournalEmpirical Economics
Volume21
Issue number1
DOIs
StatePublished - Jan 1 1996

Fingerprint

time series
Engine
Time series
import
income
Export-led growth
Import
export promotion
Pacific Rim
Human Capital
Granger Causality
Export growth
Time Series Data
Long-run
causality
human capital
evidence
Reverse
Income
Income growth

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Mathematics (miscellaneous)
  • Social Sciences (miscellaneous)
  • Economics and Econometrics

Cite this

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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 mere detection of evidence for export-led growth, to provide a measurement of its strength. 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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The engine of growth or its handmaiden? A time-series assessment of export-led growth. / Riezman, Raymond G.; Whiteman, Charles H.; Summers, Peter M.

In: Empirical Economics, Vol. 21, No. 1, 01.01.1996, p. 77-110.

Research output: Contribution to journalArticle

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