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Exports and Imports-Led Growth: Evidence from a Small Developing Economy

Author

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  • Humnath Panta

    (School of Business, Humboldt State University, Arcata, CA 95521, USA)

  • Mitra Lal Devkota

    (Mike Cottrell College of Business, University of North Georgia, Dahlonega, GA 30597, USA)

  • Dhruba Banjade

    (College of Business and Communication, Brenau University, Gainesville, GA 30501, USA)

Abstract

This paper examines equilibrium relationships and dynamic causality between economic growth, exports, and imports in Nepal using time-series data between 1965 and 2020. This research examines the impact of exports and imports on the economic growth of Nepal and documents empirical evidence in exports-led growth, imports-led growth, growth-led exports, and growth-led imports hypotheses in both the short and long run. The test results show no evidence favoring the exports-led growth and growth-led exports hypotheses in both the short and long run. However, the study finds evidence supporting the imports-led growth hypothesis in the short term and the growth-led imports hypothesis in the long term. Overall, this paper finds no evidence in favor of the notion that foreign trade supports the economic growth of Nepal in the long run. The research findings may have important implications for policymakers in Nepal. The paper contributes to trade and economic growth literature by investigating the relationship between exports, imports, capital, and gross domestic products in a small economy such as Nepal, where exports make a minimal and imports make an extensive contribution to gross domestic products by using cointegration and the vector error correction model.

Suggested Citation

  • Humnath Panta & Mitra Lal Devkota & Dhruba Banjade, 2022. "Exports and Imports-Led Growth: Evidence from a Small Developing Economy," JRFM, MDPI, vol. 15(1), pages 1-14, January.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:1:p:11-:d:716142
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    References listed on IDEAS

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    1. Boriss Siliverstovs & Dierk Herzer, 2006. "Export-led growth hypothesis: evidence for Chile," Applied Economics Letters, Taylor & Francis Journals, vol. 13(5), pages 319-324.
    2. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
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    Cited by:

    1. Muhammad Usman Arshad & Muhammad Nadir Shabbir & Momna Niazi, 2023. "Trade Openness and Public Innovation: A Causality Analysis," SAGE Open, , vol. 13(3), pages 21582440231, September.
    2. Arvian Triantoro & Muhammad Zaheer Akhtar & Shiraz Khan & Khalid Zaman & Haroon ur Rashid Khan & Abdul Wahab Pathath & Muhamad Amar Mahmad & Kamil Sertoglu, 2023. "Riding the Waves of Fluctuating Oil Prices: Decoding the Impact on Economic Growth," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 34-50, March.
    3. Zinovia TOACA & Victoria FALA, 2022. "Fdi- Exports-Gdp Nexus In The Republic Of Moldova," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 7(4), pages 193-204.
    4. Madaleno, Mara & Ahmed, Zahoor & Doğan, Buhari & Javeed, Saba & Vasa, László, 2023. "The aptness of import-led growth hypothesis for sustainable development in South Asia: Do energy utilization and natural resources matter?," Resources Policy, Elsevier, vol. 86(PB).
    5. Jean-François Hoarau & Nicolas Lucic, 2022. "Are real merchandise imports per capita a good predictor for the standard of living for the small island world: Testing for the imports-led growth and the growth-led imports hypotheses in panels over ," TEPP Working Paper 2022-16, TEPP.

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