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Is the Export-led Growth Hypothesis Valid for India? Another Look at the Evidence

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  • Sanu, Md Sahnewaz

Abstract

The previous studies on the export-led growth hypothesis in India have yielded mixed and inconclusive results. This study explores the dynamic relationship between real exports and real economic growth for India in a multivariate framework by including ‘terms of trade’ as an additional variable for the period 1980-2017. Unlike most of the previous studies, this study employs the ARDL bounds testing approach and Toda-Yamamoto version of modified Granger causality test to examine this linkage. The results of the bound tests indicate that there is a stable long-run relationship between the variables when economic growth proxied by GDP growth is the dependent variable. Further, the results of the modified Granger causality test suggest that there is unidirectional causal flow from exports to economic growth and from terms of trade to economic growth without any feedback. The study, therefore, provides further evidence that growth in exports stimulate economic growth in India while there is no evidence of growth-driven export.

Suggested Citation

  • Sanu, Md Sahnewaz, 2019. "Is the Export-led Growth Hypothesis Valid for India? Another Look at the Evidence," MPRA Paper 107903, University Library of Munich, Germany, revised 12 Sep 2019.
    • Handle: RePEc:pra:mprapa:107903
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    References listed on IDEAS

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    More about this item

    Keywords

    Export-led growth; terms of trade; ARDL bounds test; Toda-Yamamoto; causality; GDP; India;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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