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

Year 2019, Volume: 12 Issue: 4, 454 - 465, 18.10.2019
https://doi.org/10.25287/ohuiibf.507759

Abstract

The meticulous growth of both export and output of Bangladesh following the inception of trade liberalisation and export promotion in the late 1970s through 2010s gravely underscore the export-led growth (ELG) hypothesis for the economy. The present study examines whether the economic growth of Bangladesh is lead by exports employing the ARDL Bounds testing approach with particular attention to its long-run dynamics for the period from 1974 to 2015. Despite having a positive impact of trade and export on economic growth irrespective to the short run as well as in the long term, the absence of unidirectional positive causal relation from exports to economic growth, in the long run, rejects the validity of ELG hypothesis for Bangladesh. Import and gross capital formation are found to have an impact on economic growth compatible with theoretical expectation.

References

  • Agosin, M. R. (1999). Trade and growth in Chile. Cepal Review, 68, 1658-95
  • Ahmed, H. A., & Uddin, M. G. S. (2009). Export, imports, remittance and growth in Bangladesh: An empirical analysis. Trade and Development Review, 2(2).
  • Ahmed, N. (2000). Export response to trade liberalization in Bangladesh: a cointegration analysis. Applied Economics, 32(8), 1077-1084.
  • Al Mamun, K. A., & Nath*, H. K. (2005). Export-led growth in Bangladesh: a time series analysis. Applied Economics Letters, 12(6), 361-364.
  • Awokuse, T. (2008). “Trade Openness and Economic Growth: Is Growth Export-Led or Import- Led?” Applied Economics 40, no. 2: 161–173.
  • Awokuse, T. O. (2003). Is the export-led growth hypothesis valid for Canada?, Canadian Journal of Economics, 36(1), pp. 126–136.
  • Baharumshah, A. Z., & Rashid, S. (1999). Exports, Imports and Economic Growth in Malaysia: EmpiricalEvidence Based on Multivariate Time Series. Asian Economic Journal, 13(4), 389-406.
  • Bahmani-Oskooee, M. and Janardhanan Alse (1993). Export growth and economic growth: An application of cointegration and error-correction modeling. The Journal of Developing Areas, 27(4), 535-542.
  • Balassa, B. (1978) ‘Exports and economic growth: further evidence’. Journal of Development Economics 5(2), 181–189.
  • Begum, S., & Shamsuddin, A. F. (1998). Exports and economic growth in Bangladesh. The Journal of Development Studies, 35(1), 89-114.
  • Chandra Parida, P., & Sahoo, P. (2007). Export-led growth in South Asia: a panel cointegration analysis. International Economic Journal, 21(2), 155-175.
  • Chang, T., Fang, W., Liu, W., & Henry, T. (2000). Exports, imports and income in Taiwan: An examination of the export led growth hypothesis. International Economic Journal, 14(2), 151-160.
  • Doganlar, M. (2004). Export-led growth hypothesis in Asian countries: cointegration and causality analysis. Indian Journal of Economics, 84(2), 683-694.
  • Dornbusch, R., Fischer, S., & Samuelson, P. A. (1980). Heckscher-Ohlin trade theory with a continuum of goods. The Quarterly Journal of Economics, 203-224.
  • Dreger, C., and D. Herzer. 2013. “A Further Examination of the Export-Led Growth Hypothesis.” Empirical Economics 45, no. 1: 39–60.
  • Emirmahmutoglu, F., and N. Kose. (2011). “Testing for Granger Causality in Heterogeneous Mixed Panels.” Economic Modeling 28, no. 3: 870–876.
  • Ghatak, S., & Price, S. W. (1997). Export Composition and Economic Growth: Cointegration and Causality Evidence for India. Review of World Economics, 133, 538–553.
  • Ghatak, S., & Siddiki, J. U. (2001). The use of the ARDL approach in estimating virtual exchange rates in India. Journal of Applied statistics, 28(5), 573-583.
  • Heckscher, E. F., & Ohlin, B. G. (1991). Heckscher-Ohlin trade theory. The MIT Press.
  • Helpman, E. and Krugman, P. (1985) Market Structure and Foreign Trade. Cambridge, MA: MIT Press.
  • Hossain, M., & Dias Karunaratne, N. (2004). Exports and economic growth in Bangladesh: Has manufacturing exports become a new engine of export-led growth?. The international trade journal, 18(4), 303-334.
  • Doganlar, M. (2004). Export-led growth hypothesis in Asian countries: cointegration and causality analysis. Indian Journal of Economics, 84(2), 683-694.
  • Dornbusch, R., Fischer, S., & Samuelson, P. A. (1980). Heckscher-Ohlin trade theory with a continuum of goods. The Quarterly Journal of Economics, 203-224.
  • Dreger, C., and D. Herzer. 2013. “A Further Examination of the Export-Led Growth Hypothesis.” Empirical Economics 45, no. 1: 39–60.
  • Emirmahmutoglu, F., and N. Kose. (2011). “Testing for Granger Causality in Heterogeneous Mixed Panels.” Economic Modeling 28, no. 3: 870–876.
  • Ghatak, S., & Price, S. W. (1997). Export Composition and Economic Growth: Cointegration and Causality Evidence for India. Review of World Economics, 133, 538–553.
  • Ghatak, S., & Siddiki, J. U. (2001). The use of the ARDL approach in estimating virtual exchange rates in India. Journal of Applied statistics, 28(5), 573-583.
  • Heckscher, E. F., & Ohlin, B. G. (1991). Heckscher-Ohlin trade theory. The MIT Press.
  • Helpman, E. and Krugman, P. (1985) Market Structure and Foreign Trade. Cambridge, MA: MIT Press.
  • Hossain, M., & Dias Karunaratne, N. (2004). Exports and economic growth in Bangladesh: Has manufacturing exports become a new engine of export-led growth?. The international trade journal, 18(4), 303-334.
  • Mamun, A., BAL, H., & AKCA, E. E. (2019). The export-output growth nexus in Bangladesh: a leveraged bootstrap approach. Journal of Asia Business Studies, 13(2), 196-213.
  • Mascelluti, E. (2015). The extraordinary growth of the four Asian tigers, Department of Economics and Finance, LUISS Guido Carli, Italy.
  • Mishra, P. K. (2011). The Dynamics of Relationship between exports and economic growth in India. International Journal of Economic Sciences and Applied Research 4(2), 53-70.
  • Olson, J. E. (2014). Economic Growth in Latin American Countries: Is It Based on Export-Led or Import-Led Growth? Emerging Markets Finance and Trade, 50(sup1), 6-20.
  • Page, J. (1994). The East Asian miracle: four lessons for development policy. In NBER Macroeconomics Annual 1994, Volume 9 (pp. 219-282). MIT Press.
  • Paul, B. P. (2011). Revisiting export-led growth for Bangladesh: A synthesis of cointegration and innovation accounting. International Journal of Economics and Finance, 3(6), 3.
  • Paul, B. P. (2014). Testing export-led growth in Bangladesh: An ARDL bounds test approach. International Journal of Trade, Economics and Finance, 5(1), 1.
  • Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.
  • Riezman, R.G.; P.M. Summers; and C.H. Whiteman. (1996). “The Engine of Growth or Its Handmaiden? A Time-Series Assessment of Export-Led Growth.” Empirical Economics 21, no. 1: 77–113.
  • Shan, J., & Sun, F. (1998). On the export-led growth hypothesis: the econometric evidence from China. Applied Economics, 30(8), 1055-1065.
  • Shirazi, N. S., & Manap, T. A. A. (2005). Export-led growth hypothesis: further econometric evidence from South Asia. Developing Economies, 43(4), 472-488.
  • Siliverstovs, B., & Herzer, D. (2006). Export-led growth hypothesis: evidence for Chile. Applied Economics Letters, 13(5), 319-324.
  • Sultan, P. (2008). Trade, industry and economic growth in Bangladesh. Journal of Economic cooperation, 29(4), 71-92.
  • Toda, H. Y. & Yamamoto, T. (1995), “Statistical inference in vector autoregressions with possibly integrated processes”, Journal of Econometrics, Vol. 66, pp. 225-250.
  • Van den Berg, H., and J.R. Schmidt. (1994). “Foreign Trade and Economic Growth: Time Series Evidence from Latin America.” Journal of International Trade and Economic Development 3, no. 3: 249–268.
  • World Bank, World Development Indicators, 2016

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

Year 2019, Volume: 12 Issue: 4, 454 - 465, 18.10.2019
https://doi.org/10.25287/ohuiibf.507759

Abstract

The
meticulous growth of both export and output of Bangladesh following the
inception of trade liberalisation and export promotion in the late 1970s
through 2010s gravely underscore the export-led growth (ELG) hypothesis for the
economy. The present study examines whether the economic growth of Bangladesh
is lead by exports employing the ARDL Bounds testing approach with particular
attention to its long-run dynamics for the period from 1974 to 2015. Despite
having a positive impact of trade and export on economic growth irrespective to
the short run as well as in the long term
, the
absence of unidirectional positive causal relation from exports to economic
growth, in the long run
,
rejects the validity of ELG hypothesis for Bangladesh. Import and gross capital
formation are found to have an impact on economic growth compatible with
theoretical expectation.

References

  • Agosin, M. R. (1999). Trade and growth in Chile. Cepal Review, 68, 1658-95
  • Ahmed, H. A., & Uddin, M. G. S. (2009). Export, imports, remittance and growth in Bangladesh: An empirical analysis. Trade and Development Review, 2(2).
  • Ahmed, N. (2000). Export response to trade liberalization in Bangladesh: a cointegration analysis. Applied Economics, 32(8), 1077-1084.
  • Al Mamun, K. A., & Nath*, H. K. (2005). Export-led growth in Bangladesh: a time series analysis. Applied Economics Letters, 12(6), 361-364.
  • Awokuse, T. (2008). “Trade Openness and Economic Growth: Is Growth Export-Led or Import- Led?” Applied Economics 40, no. 2: 161–173.
  • Awokuse, T. O. (2003). Is the export-led growth hypothesis valid for Canada?, Canadian Journal of Economics, 36(1), pp. 126–136.
  • Baharumshah, A. Z., & Rashid, S. (1999). Exports, Imports and Economic Growth in Malaysia: EmpiricalEvidence Based on Multivariate Time Series. Asian Economic Journal, 13(4), 389-406.
  • Bahmani-Oskooee, M. and Janardhanan Alse (1993). Export growth and economic growth: An application of cointegration and error-correction modeling. The Journal of Developing Areas, 27(4), 535-542.
  • Balassa, B. (1978) ‘Exports and economic growth: further evidence’. Journal of Development Economics 5(2), 181–189.
  • Begum, S., & Shamsuddin, A. F. (1998). Exports and economic growth in Bangladesh. The Journal of Development Studies, 35(1), 89-114.
  • Chandra Parida, P., & Sahoo, P. (2007). Export-led growth in South Asia: a panel cointegration analysis. International Economic Journal, 21(2), 155-175.
  • Chang, T., Fang, W., Liu, W., & Henry, T. (2000). Exports, imports and income in Taiwan: An examination of the export led growth hypothesis. International Economic Journal, 14(2), 151-160.
  • Doganlar, M. (2004). Export-led growth hypothesis in Asian countries: cointegration and causality analysis. Indian Journal of Economics, 84(2), 683-694.
  • Dornbusch, R., Fischer, S., & Samuelson, P. A. (1980). Heckscher-Ohlin trade theory with a continuum of goods. The Quarterly Journal of Economics, 203-224.
  • Dreger, C., and D. Herzer. 2013. “A Further Examination of the Export-Led Growth Hypothesis.” Empirical Economics 45, no. 1: 39–60.
  • Emirmahmutoglu, F., and N. Kose. (2011). “Testing for Granger Causality in Heterogeneous Mixed Panels.” Economic Modeling 28, no. 3: 870–876.
  • Ghatak, S., & Price, S. W. (1997). Export Composition and Economic Growth: Cointegration and Causality Evidence for India. Review of World Economics, 133, 538–553.
  • Ghatak, S., & Siddiki, J. U. (2001). The use of the ARDL approach in estimating virtual exchange rates in India. Journal of Applied statistics, 28(5), 573-583.
  • Heckscher, E. F., & Ohlin, B. G. (1991). Heckscher-Ohlin trade theory. The MIT Press.
  • Helpman, E. and Krugman, P. (1985) Market Structure and Foreign Trade. Cambridge, MA: MIT Press.
  • Hossain, M., & Dias Karunaratne, N. (2004). Exports and economic growth in Bangladesh: Has manufacturing exports become a new engine of export-led growth?. The international trade journal, 18(4), 303-334.
  • Doganlar, M. (2004). Export-led growth hypothesis in Asian countries: cointegration and causality analysis. Indian Journal of Economics, 84(2), 683-694.
  • Dornbusch, R., Fischer, S., & Samuelson, P. A. (1980). Heckscher-Ohlin trade theory with a continuum of goods. The Quarterly Journal of Economics, 203-224.
  • Dreger, C., and D. Herzer. 2013. “A Further Examination of the Export-Led Growth Hypothesis.” Empirical Economics 45, no. 1: 39–60.
  • Emirmahmutoglu, F., and N. Kose. (2011). “Testing for Granger Causality in Heterogeneous Mixed Panels.” Economic Modeling 28, no. 3: 870–876.
  • Ghatak, S., & Price, S. W. (1997). Export Composition and Economic Growth: Cointegration and Causality Evidence for India. Review of World Economics, 133, 538–553.
  • Ghatak, S., & Siddiki, J. U. (2001). The use of the ARDL approach in estimating virtual exchange rates in India. Journal of Applied statistics, 28(5), 573-583.
  • Heckscher, E. F., & Ohlin, B. G. (1991). Heckscher-Ohlin trade theory. The MIT Press.
  • Helpman, E. and Krugman, P. (1985) Market Structure and Foreign Trade. Cambridge, MA: MIT Press.
  • Hossain, M., & Dias Karunaratne, N. (2004). Exports and economic growth in Bangladesh: Has manufacturing exports become a new engine of export-led growth?. The international trade journal, 18(4), 303-334.
  • Mamun, A., BAL, H., & AKCA, E. E. (2019). The export-output growth nexus in Bangladesh: a leveraged bootstrap approach. Journal of Asia Business Studies, 13(2), 196-213.
  • Mascelluti, E. (2015). The extraordinary growth of the four Asian tigers, Department of Economics and Finance, LUISS Guido Carli, Italy.
  • Mishra, P. K. (2011). The Dynamics of Relationship between exports and economic growth in India. International Journal of Economic Sciences and Applied Research 4(2), 53-70.
  • Olson, J. E. (2014). Economic Growth in Latin American Countries: Is It Based on Export-Led or Import-Led Growth? Emerging Markets Finance and Trade, 50(sup1), 6-20.
  • Page, J. (1994). The East Asian miracle: four lessons for development policy. In NBER Macroeconomics Annual 1994, Volume 9 (pp. 219-282). MIT Press.
  • Paul, B. P. (2011). Revisiting export-led growth for Bangladesh: A synthesis of cointegration and innovation accounting. International Journal of Economics and Finance, 3(6), 3.
  • Paul, B. P. (2014). Testing export-led growth in Bangladesh: An ARDL bounds test approach. International Journal of Trade, Economics and Finance, 5(1), 1.
  • Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.
  • Riezman, R.G.; P.M. Summers; and C.H. Whiteman. (1996). “The Engine of Growth or Its Handmaiden? A Time-Series Assessment of Export-Led Growth.” Empirical Economics 21, no. 1: 77–113.
  • Shan, J., & Sun, F. (1998). On the export-led growth hypothesis: the econometric evidence from China. Applied Economics, 30(8), 1055-1065.
  • Shirazi, N. S., & Manap, T. A. A. (2005). Export-led growth hypothesis: further econometric evidence from South Asia. Developing Economies, 43(4), 472-488.
  • Siliverstovs, B., & Herzer, D. (2006). Export-led growth hypothesis: evidence for Chile. Applied Economics Letters, 13(5), 319-324.
  • Sultan, P. (2008). Trade, industry and economic growth in Bangladesh. Journal of Economic cooperation, 29(4), 71-92.
  • Toda, H. Y. & Yamamoto, T. (1995), “Statistical inference in vector autoregressions with possibly integrated processes”, Journal of Econometrics, Vol. 66, pp. 225-250.
  • Van den Berg, H., and J.R. Schmidt. (1994). “Foreign Trade and Economic Growth: Time Series Evidence from Latin America.” Journal of International Trade and Economic Development 3, no. 3: 249–268.
  • World Bank, World Development Indicators, 2016
There are 46 citations in total.

Details

Primary Language English
Journal Section Articles
Authors

Harun Bal 0000-0003-0878-8253

Abdulla Hil Mamun 0000-0001-6997-4434

Shahanara Basher This is me 0000-0001-5816-9050

Mohammad Rahim Uddın 0000-0001-5112-7253

Masrurul Mowla This is me 0000-0002-8326-8066

Publication Date October 18, 2019
Submission Date January 3, 2019
Acceptance Date September 27, 2019
Published in Issue Year 2019 Volume: 12 Issue: 4

Cite

APA Bal, H., Mamun, A. H., Basher, S., Uddın, M. R., et al. (2019). Export-Led Growth Hypothesis in Developing Countries: Econometric Evidence from Bangladesh. Ömer Halisdemir Üniversitesi İktisadi Ve İdari Bilimler Fakültesi Dergisi, 12(4), 454-465. https://doi.org/10.25287/ohuiibf.507759

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