Abo-Zaid, Salem (2010): The Trade–Growth Relationship in Israel Revisited: Evidence from Annual Data, 1960-2004.
Download (465kB) | Preview
The topic of trade effects on economic growth has been usually controversial. Former empirical evidence linking trade to growth in Israel has been mixed and inconclusive either. This study reexamines the role of trade in Israel by testing for cointegration and causality from both exports and imports to output and total factor productivity over the period 1960-2004. The results suggest that both output and TFP are positively long-run correlated with exports and imports. The Granger causality tests indicate positive effects of exports on both output and TFP, where imports influence output only. In addition, physical capital has also been found to be Granger-caused by imports. This may suggest that the impact of imports on output is through the accumulation of physical capital and/or improvement in TFP over time.
|Item Type:||MPRA Paper|
|Original Title:||The Trade–Growth Relationship in Israel Revisited: Evidence from Annual Data, 1960-2004|
|Keywords:||Trade-growth relationships, Cointegration, Causality , Israeli economy|
|Subjects:||O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
|Depositing User:||Salem Abo-Zaid|
|Date Deposited:||03. Nov 2010 09:00|
|Last Modified:||13. Feb 2013 11:16|
Ades A.and Glaeser E. "Evidence on Growth, Increasing Returns and the Extent of the Market", NBER Working Paper No. 4714, Apr., 1994.
Awokuse T. "Export-led Growth and the Japanese Economy: Evidence from VAR and Directed Acyclic Graphs," Applied Economics Letters, 12(14), Nov., 2005, pp.849-858.
Barro, R. "Economic Growth in a Cross Section of Countries", the Quarterly Journal of Economics, 106(2), May, 1991, pp.407-443.
Benhabib J. and Spiegel M. “The Role of Human Capital in Economic Development: Evidence from Aggregate Cross-Country Data”, Journal of Monetary Economics, 34(2), Oct., 1994, pp.143-173.
Bregman A. and Marom A. "Causes of Growth in the Business Sector in Israel, 1958-1988", Research Department, Bank of Israel, Discussion Paper No. 93.02, Jun., 1993. (Hebrew).
Bregman A. and Marom A. "The Contribution of Human Capital to Growth and Productivity in Israel's Business Sector, 1970-1999", Research Department, Bank of Israel, Discussion Paper No. 2005.14, Dec., 2005. (Hebrew).
Coe D. and Helpman E. “International R&D Spillovers”, European Economic Review, 39(5), May 1995, pp.859-887.
Dar A. and Amirkhalkhali S. " On the Impact of Trade Openness on Growth: Further Evidence from OECD Countries", Applied Economics, 35 (16), Nov.,2003, pp.1761-1766.
Doyle E. " Export-Output Causality and the Role of Exports in Irish Growth: 1950-1997", International Economic Journal, 15(3), 2001, pp.31-54.
Edwards S. “Openness, Productivity and Growth: What Do We Really Know?” Economic Journal, 108, Mar.,1998, pp.383-398.
Engle R. and Granger C. “Cointegration and Error-Correction: Representation, Estimation and Testing”, Econometrica, 55, 1987, pp.251-276.
Fischer S. “The Role of Macroeconomic Factors in Growth”, Journal of Monetary Economics, 32(3), Dec., 1993, pp.485-512.
Frankel, J and Romer D. " Does Trade Cause Growth?", American Economic Review, 89(3), Jun., 1999, pp. 379-399 .
Ghatak S., Milner C., and Utkulu U. ”Exports, Export composition and Growth: Cointegration and Causality Evidence for Malaysia”, Applied Economics, 29(), 1997, pp.213-223.
Gils J.A and Williams C.L. "Export-led Growth: a Survey of the Empirical Literature and Some Non-Causality Results. Part 1", Journal of International Trade & Economic Development, 9(3), Sep., 2000, pp. 261-337.
Granger C. "Investigating causal relations by econometric models and cross-spectral methods", Econometrica, 37(3), Jul.,1969, pp.424-438.
Grossman G. and Helpman E. "Trade, Knowledge Spillover, and Growth", European Economic Review, 35(2-3), Apr., 1991, pp.517-526.
Harrison A. " Openness and Growth: A Time-Series, Cross-Country Analysis for Developing Countries", Journal of Development Economics, 48, 2003, pp. 419-447.
Helpman E. “Israel’s Economic Growth: An International Comparison”, Israel Economic Review, 1, 2003, pp.1-10.
Henriques I. and Sadorsky P. "Export-Led Growth or Growth-Driven Exports? The Canadian Case", The Canadian Journal of Economics, 29(3), Aug., 1996, pp.540-555.
Hercowitz Z., Lavi Y. and Melnick R. “The Impact of Macroeconomic Factors on Productivity in Israel, 1960-96”, Bank of Israel Economic Review, 72, 1999, 103-124.
Herzer D., Newak-Lehman D., and Siliverstovs B. “Export-Led Growth in Chile: Assessing the Role of Export,” Ibero-America Institute for Economic Research.
Johansen S. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models", Econometrica, 59(6), Nov.,1991, pp.1551-1580.
Johansen S. "Likelihood-Based Inference in Cointegrated Vectors in Autoregressive Models", Oxford: Oxford University Press, 1995.
Kugler P. "Growth, Exports and Cointegration: An Empirical Investigation", Weltwirtschaftliches Archiv, 127(1), 1991, pp.73-82
Krugman P. "The myth of Asia's Miracle", Foreign Affairs, 73, Nov.-Dec.,1994 pp.259-292.
Lavi Y. and Strawczynski M. "The Effect of Policy Variables and Immigration on Business-Sector Product and its Components (Factor Iinputs and Total Factor Productivity); Israel, 1960-95, Bank of Israel Economic Review, 73, Jan., 2001, pp. 109-141. (Hebrew).
Lawrence R. and Weinstein D. "Trade and Growth: Import-Led or Export led? Evidence form Japan and Korea", NBER Working Paper No. 7264, Jul., 1999 .
Levine R. and Renelt D. "A Sensitivity Analysis of Cross-Country Growth Regressions ", American Economic Review, 82(4), Sep., 1992, pp.942-963.
Haug A., Mackinnon J. and Michelis L. "Numerical Distribution Functions of Likelihood Ratios Tests for Cointegration ", Journal of Applied Econometrics, 14(5), Sep.-Oct.,1999, pp.563-577.
Mackinnon J. "Numerical Distribution Functions for Unit Root and Cointegration Tests", Journal of Applied Econometrics, 11(6), Nov.-Dec. 1996, pp.601-618.
Kose A., Prasad E. , Rogoff K. and Wei S. "Financial Globalization, Growth and Volatility in Developing Countries", NBER Working Paper No. 10942 , Dec.,2004 .
Perron P. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis", Econometrica, 57(6), Nov., 1989, pp. 1361-1401.
Quah D. and Rauch J. “Openness and the Rate of Economic Growth”,Manuscript, MIT, 1990.
Rodriguez F. and Rodrik D. " Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence", NBER Working Paper No. 7081 , Apr.,1999 .
Rodrik D. " Trade and Industrial Policy Reform in Developing Countries: A Review of Recent Theory and Evidence", NBER Working Paper No. 4417, Aug., 1993.
Romer P. "Capital, Labor, and Productivity", Brookings Papers on Economic Activity: Microeconomics, Special Issue, 1990b, pp. 337-367.
Schwartz G. "Estimating the Dimension of a Model", The Annals of Statistics, 6(2), Mar., 1978, pp. 461-464. Thornton J. "Cointegration, Causality and Export-Led Growth in Mexico, 1895-1992", Economics Letters, 50(3), Mar.,1996, pp.413-416.
Véganzonès M.A., Winograd C." Human Capital, Trade Openness and Growth in Argentina in the 20th Century", Labour, 12 (2), Jul., 1998, pp. 170-424.
Wacziarg R. "Measuring the Dynamic Gains from Trade", Stanford University Working Paper, May, 1998.
Wacziarg R. and Welch K. "Trade Liberalization and Growth: New Evidence", NBER Working Paper No. 10152, Dec., 2003.
Weinhold D. and Rauch J. “Openness, Specialization, and Productivity Growth in Less Developed Countries" , NBER Working Paper No. 6131, Aug.,1997 .