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Trade openness and economic growth: is growth export-led or import-led?

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  • Titus Awokuse

Abstract

Most previous investigations have only focused on the effect of export expansion on economic growth while ignoring the potential growth-enhancing contribution of imports. This article re-examines the relationship between trade and economic growth in Argentina, Colombia, and Peru with emphasis on both the role of exports and imports. Granger causality tests and impulse response functions were used to examine whether growth in trade stimulate economic growth (or vice versa). The results suggest that the singular focus of past studies on exports as the engine of growth may be misleading. Although there is some empirical evidence supporting export-led growth, the empirical support for import-led growth hypothesis is relatively stronger. In some cases, there is also evidence for reverse causality from gross domestic product growth to exports and imports.

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  • Titus Awokuse, 2007. "Trade openness and economic growth: is growth export-led or import-led?," Applied Economics, Taylor & Francis Journals, vol. 40(2), pages 161-173.
    • Handle: RePEc:taf:applec:v:40:y:2007:i:2:p:161-173
    DOI: 10.1080/00036840600749490
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    References listed on IDEAS

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    1. Jagdish N. Bhagwati, 1978. "Anatomy of Exchange Control Regimes," NBER Chapters, in: Foreign Trade Regimes and Economic Development: Anatomy and Consequences of Exchange Control Regimes, pages 7-52, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Ana Paula Ribeiro & Paula Gracinda Teixeira Santos & Vitor Carvalho, 2013. "Export-led growth in Europe: Where and what to export?," EcoMod2013 5265, EcoMod.
    2. Mohammad Mafizur Rahman & Muhammad Shahbaz, 2013. "Do Imports and Foreign Capital Inflows Lead Economic Growth? Cointegration and Causality Analysis in Pakistan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 14(1), pages 59-81, March.
    3. Fullerton, Thomas M., Jr. & Kababie, Kababie & Boehmer, Charles R., 2012. "International trade and economic growth in Mexico," MPRA Paper 42991, University Library of Munich, Germany.
    4. Muhammad, Shahbaz & Mohammad, Mafizur Rahman & Abdul, Farooq, 2012. "Financial Development, International Trade and Economic Growth in Australia:New Evidence from Multivariate Framework Analysis," MPRA Paper 42023, University Library of Munich, Germany, revised 17 Oct 2012.
    5. Muhammad Shahbaz & Mohammad Mafizur Rahman, 2012. "The Dynamic of Financial Development, Imports, Foreign Direct Investment and Economic Growth: Cointegration and Causality Analysis in Pakistan," Global Business Review, International Management Institute, vol. 13(2), pages 201-219, June.
    6. Teboho Jeremiah Mosikari, 2013. "The Relationship between Trade Openness and GDP Growth Rate: The Case of South Africa (1994Q1-2008Q4)," Journal of Economics and Behavioral Studies, AMH International, vol. 5(10), pages 669-677.
    7. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    8. Sadorsky, Perry, 2012. "Energy consumption, output and trade in South America," Energy Economics, Elsevier, vol. 34(2), pages 476-488.
    9. Yakub Halabi, 2013. "Perpetuating the global division of labour: defensive free trade and development in the third world," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 20(1), pages 91-120, June.

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