Export-led growth: a survey of the empirical literature and some non-causality results. Part 1

Abstract

The economic development and growth literature contains extensive discussions on relationships between exports and economic growth. One debate centres on whether countries should promote the export sector to obtain economic growth. An abundant empirical literature on this export-led growth (ELG) hypothesis has followed. We aim to contribute to this literature in two ways. In this paper, part 1, we provide a comprehensive survey of more than 150 export-growth applied papers. We describe the changes that have occurred, over the last two decades, in the methodologies used empirically to examine for relationships between exports and economic growth, and we provide information on the current findings.The last decade has seen an abundance of time series studies that focus on examining for causality via exclusions restrictions tests, impulse response function analysis and forecast error variance decompositions. Our second contribution is to examine some of these time series methods. We show, in part 2, that ELG results based on standard causality techniques are not typically robust to specification or method. We do this by reconsidering two export-led growth applications - Oxley's (1993) study for Portugal, and Henriques and Sadorsky's (1996) analysis for Canada. Our results suggest that extreme care should be exercised when interpreting much of the applied research on the ELG hypothesis.Economic Growth, Export Promotion, Causality, Time Series Models, Cointegration, Innovation Accounting,

Multivariate granger causality between electricity consumption, exports and GDP: Evidence from a panel of Middle Eastern countries

“…First generation studies that did not consider the stationarity of the data and used simple correlation methods found strong support for the export-led hypothesis; however, more recent studies which have taken stationarity into account have found mixed support for the export-led and handmaiden hypotheses (see Giles and Williams, 2000;Ahmad, 2001 for reviews). There are a small number of papers that have examined Granger causality between exports and GDP for MENA countries (see e.g.…”

Economic Growth in Latin American Countries: Is It Based on Export-Led or Import-Led Growth?

“…Ahmad et al (1997) and Chen (2007) analyze the GLE and ELG hypotheses and find evidence for both. Bahmani-Oskooee and Economidou (2009), Bodman (1996), Chow (1987), Giles and Williams (2000), Greenaway and Sapsford (1994), Hsiao (1987), Oxley (1993), and Singh (2003) do not find evidence for both the GLE and ELG hypotheses; instead, some find support for the GLE and others for the ELG.…”

“…From another point of view, the increase in a country's exports may indicate the reallocation of productive resources toward industries that are more efficient at a global level, which implies an increase in productivity; thus, there should be economic growth. Giles and Williams (2000) describe different approaches to develop models to test the ELG theory.…”

What can Trigger the Resumption of Economic Growth in a Small Open Economy like Greece: Exports or Inward FDI?

“…Opponents of the export-led growth hypothesis state that the markets of developed countries are not large enough to absorb the products of less developed countries (Giles & Williams, 2000a) and that, when compared with exports, other factors play a more crucial role in economic growth (Rodrik, 1992). Finally, while import demand in developed economies may be affected by factors such as the unpredictability of financial markets and the volatility of commodity prices, an export expansion may not result in a sustainable economic development in less developed countries.…”