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Output growth and the variability of exports and imports growth: international evidence from Granger causality tests

Afxentiou, Panos and Serletis, Apostolos (2000): Output growth and the variability of exports and imports growth: international evidence from Granger causality tests. Published in: The Developing Economies , Vol. 38, No. 2 (2000): pp. 141-163.

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Economic development was from the very beginning the focus of classical political economy and presently retains its original human welfare mission and intellectual attraction through insightful anthropological, sociological, and historical investigations.1 Within the context of complex and constantly evolving sociospheres, the objective of a sustained better life for the masses is enhanced, according to Nobel Prize winner Amartya K. Sen (1983, 1988), by functionings and entitlements which cannot be implemented without a public commitment and a deep government involvement. Notwithstanding the inevitability of semantical differences, the real challenge of development does not lie in eliminating definitional disputes pertaining to the objective of development but in illuminating those pertinent instrumental relations which are relevant in each social milieu, and which, when properly activated, generate an internal development dynamic. Such a dynamic would exhibit characteristics of uniformity in countries with high degrees of similarity in human and natural resources, in institutions and in individual preferences. If advanced industrial countries converge toward similar patterns, the same cannot be observed in developing countries whose differences are more pronounced than their similarities. The task of establishing meaningful patterns of uniformity in the highly differentiated developing world is not easy, but if accomplished, it would guarantee substantial benefits in the formulation of effective strategies and policies. An area in which the search for such patterns goes on unabated is that of international trade and openness. Forces of dependence, autarky, balance of payments, international competition, vulnerability to external shocks affect the objective of developing countries to achieve some degree of balanced growth,2 and most certainly influence their patterns of trade. Although these forces are important, they are beyond the scope of this paper, which focuses on the investigation of possible trade patterns and their impact on growth. In the course of this investigation the paper is organized as follows. In the next section the role of openness is examined along with citations of empirical studies that analyze the impact of export growth and export growth volatility on the growth of GNP. In the third section the rationale of Granger causality, which constitutes the core of the paper, is presented, followed by short sections on unit root tests, cointegration tests, and volatility tests that are accompanied by a brief analysis of the respective statistical results. In the final section the conclusions of the paper are summarized.

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