The export-output growth nexus in Bangladesh: a leveraged bootstrap approach

Abstract

Purpose The study aims to examine the export-led growth (ELG) hypothesis for Bangladesh. The direction of causality between export and output largely determines the success of export-oriented trade policies. A unidirectional causality running from export to output growth is required according to the narrow definition, while bidirectional causality is allowed for the broader definition. The study offers the causality inference, both from narrow and broader senses. Design/methodology/approach The study uses the bootstrap version of Toda and Yamamoto-modified causality tests, a recent development in time series econometrics, robust against the regularity conditions such as stationarity, properties of integration and cointegration and constancy of parameters. It uses monthly secondary data for the period of 1990-2014. Findings Test results suggest a unidirectional positive causal relationship from exports to output growth, meaning that the policies and strategies supporting exports are promoting output growth and thereby approve the ELG hypothesis for Bangladesh from the narrow sense. However, the absence of bidirectional causality between export and output growth, necessary to support the ELG hypothesis from the broader perspective, discards the conjecture that output growth is reinvigorated through the probable second-round effects of ELG produced from output growth to exports. Practical implications Lower investments in infrastructure, technology and education are reasons for the absence of ELG from the broader sense. Therefore, directing returns generated from exports for the development of technology, infrastructure and human capital, with regular and continuous revision of trade-liberalization policies so as to make its exports more competitive in the world market, will help Bangladesh trigger the second-round effect of ELG produced from output growth to exports. Originality/value Beyond the conventional approaches, this is the first contemporary time series econometrics causality analysis between export and output growth of Bangladesh, both from narrow and broader senses.

Does currency misalignment matter for economic growth? – Evidence from Turkey

“…As Rodrik (2008) argues, the growth of an economy is stimulated by undervaluation, while overvaluation hurts it. Undervaluation of home currency improves competitiveness of home country by reducing export prices and thereby raising demand for exportable goods in the international market which ultimately spurs growth of the economy (Kandil et al, 2007;Vieira and MacDonald, 2012;Schr€ oder, 2013;Mamun et al, 2019) On the other hand, overvaluation falters growth by paving the way of current account and balance of payment crisis, foreign currency shortage and rent-seeking, (Rodrik, 2008). Misalignment can work as an impediment in allocating resources of an economy between its tradable and nontradable sectors in accordance with relative cost and productivity differentials by altering investment decisions, and thus the adjustments brought through misalignment can impose burden of resource misallocation on that economy and thereby can faulter economic growth.The Turkish lira witnessed some dramatic price movements over the last few decades.…”

Revisiting Export-Output Growth Nexus: Findings from Granger Causality and Leveraged Bootstrap Approach for Japan

“…In testing the relationship between exports and output growth, the study takes industrial production into account in place of national income to get rid of the income identification problem. This is because these two variables are frequently used interchangeably in researches examining the causality within exports and growth of output (Shan and Sun, 1998;Mamun and Nath, 2005;Awokuse, 2006;Tang, 2013;Mamun et al, 2019). While the export-growth relationship is analyzed within the context of ELG hypothesis, potential capital, labor productivity, and import variables are also expected to affect output growth and hence introduced as independent variables in the econometric model.…”

Export-Led Growth Hypothesis in Developing Countries: Econometric Evidence from Bangladesh

“…A unidirectional causal relationship from export to output growth is necessary for the validity of the ELG hypothesis. However, bidirectional causality between export and output implies that growth in exports reinvigorates output growth which, in turn, reinforces export expansion and thereby further underlines the validity of ELG hypothesis (Mamun, et al, 2019).…”