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Testing Export-led Growth Hypothesis in Kenya: An ADRL Bounds Test Approach

Mohan, Ramesh and Nandwa, Boaz (2007): Testing Export-led Growth Hypothesis in Kenya: An ADRL Bounds Test Approach.

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Abstract

Over the years, there has been extensive research on the relationship between a country’s export and economic growth with ambiguous and mixed results. Instead of using the conventional cointegration approach, this paper re-examines the export-led growth hypothesis for Kenya using autoregressive distributed lag (ADRL) bounds technique. This approach is capable of testing for the existence of a long-run relationship regardless of whether the underlying time series are individually I(1) or I(0). This enhances the stability and robustness of our results. In addition, we examine the Granger causality between exports and economic growth over the sample period. The results indicate that there exists a long-term relationship between GDP growth and exports, and it is unidirectional, running from exports to GDP growth. Hence, in the case of Kenya, export enhancing policies are recommended in promoting and sustaining economic growth.

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