Are Thai Manufacturing Exports and Imports of Capital Goods Related?

Jiranyakul, Komain (2011): Are Thai Manufacturing Exports and Imports of Capital Goods Related?

Abstract

This paper examines the relationship between manufacturing exports and imports of capital goods in Thailand using monthly data from January 2000 to July 2011. The results from bounds testing for cointegration show that there exists long-run equilibrium relationship between exports and imports of capital goods in manufacturing sector. In addition, the positive relationship between the growth rate of imports of capital goods and the growth rate of manufacturing exports is observed. The results support the notion that foreign capital is essential in the process of industrialization, and thus economic growth. A decline in imports of capital goods will reduce manufacturing exports and impedes economic growth in the future. It is also likely that exports of manufactured products are the main source of foreign exchanges to finance imports of capital goods which cannot be produced in the country due to comparative disadvantage.

• Item Type: MPRA Paper
• Language: English
• Keywords: Manufacturing Exports; Imports of Capital Goods; Economic Growth; Cointegration; Causality
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development

References

[1] J. B. De Long and L. H. Summers, “Equipment Investment and Economic Growth,” Quarterly Journal of Economics, Vol. 106, No. 2, 1991, pp. 445-502.

[2] J. Eaton and S. Kortum, “Trade in Capital Goods,” European Economic Review, Vol. 45, No. 1, 2001, pp. 1195-1235. [3] World Economic Forum, “The Global Competitiveness Reports, 2008-2009,” Geneva, 2008.

[4] F. Caselli and D. Wilson, “Importing Technology,” Journal of Monetary Economics, Vol. 51, No. 1, 2004, pp. 1-32.

[5] D. Quah and J Rauch, “Openness and the Role of Eco-nomic Growth,” Mimeo, MIT, Cambridge, 1990.

[6] P. Krugman, “Trade, Accumulation, and Uneven Development,” Journal of Development Economics, Vol. 8, No. 2, 1981, pp. 6-8.

[7] A. Kruger, “The Effects of Trade Strategies on Growth,” Finance and Development, Vol. 20, No. 2, 1983, pp. 6-8.

[8] J. W. Lee, “Capital Goods Imports and Long-Run Growth,” NBER Working Paper, No. 4725, 1994.

[9] J. Mazumdar, “Imported Machinery and Growth in LDCs,” Journal of Development Economics, Vol. 65, No. 1, 2001, pp. 209-224.

[10] J. Temple, “Equipment Investment and the Solow Growth Model,” Oxford Economic Papers, Vol. 50, No. 1, 1998, pp. 39-62.

[11] U. Dulleck and N. Foster, “Imported Equipment, Human Capital and Economic Growth in Developing Countries,” Working Paper No. 16, National Center for Economic Research, 2007.

[12] T. Tambunan, “Why Do Least Developed Countries in Asia Not Benefit from Transfers of Technology,” ART-NeT Policy Brief, No. 18, 2009.

[13] K Jiranyakul, “Recent Evidence of the Validity of the Export-Led Growth Hypothesis for Thailand,” Economics Bulletin, Vol. 30, No. 3, 2010, pp. 2151-2159.

[14] M. H. Pesaran, Y. Shin and R. I. Smith, “Bounds Testing Approaches to the Analysis of Level Relationship,” Jour-nal of Applied Econometrics, Vol. 16, No. 3, 2001, pp. 289- 326.

[15] A. C. Arize and C. Augustine, “Imports and Exports in 50 Countries: Test of Cointegration and Structural Breaks,” International Review of Economics and Finance, Vol. 11, No. 1, 2002, pp. 101-105.

[16] M. Irandoust and J. Ericson, “Are Exports and Imports Cointegrated? An International Comparison,” Metroeconomica, Vol. 55, No.1, 2004, pp. 49-64.

[17] F. Sekman and S. Saribas, “Cointegration and Causality among Exchange Rate, Export and Import: Empirical Evidence from Turkey,” Applied Econometrics and In-ternational Development, Vol. 7, No. 2, 2007, pp. 71-78.

[18] C. W. J. Granger, “Investigating Causal Relations by Econometric Models and Cross-Spectral Methods,” Eco- nometrica, Vo. 37, 1969, pp. 424-438.

[19] D. A. Dickey and W. A. Fuller, “Likelihood Ratio Statis-tics and Autoregressive Time Series with a Unit Root,” Econometrica, Vol. 49, No. 4, 1981, pp. 1057-1072.

[20] P. C. B. Phillips and P. Perron, “Testing for a Unit Root in Time Series Regression,” Biometrika, Vol. 45, No. 2, 1988, pp. 335-346.

[21] J. G. MacKinnon, “Numerical Distribution Functions for Unit Root and Cointegration Tests,” Journal of Applied Econometrics, Vol. 11, No. 6, 1996, pp. 601-618.

[22] R. F. Engle and C. W. J. Granger, “CoIntegration and Error Correction: Representation, Estimation and Testing,” Econometrica, Vol. 55, No. 2, 1987, pp. 251-276.

[23] S. Johansen, “Estimation and Hypothesis Testing for Cointegration Vectors in Gaussian Vector Autoregressive Models,” Econometrica, Vol. 59, No. 6, 1991, pp. 1551-1580.

[24] N. Nunn and D. Trefler, “The Structures of Tariffs and Long-term Growth,” American Economic Journal: Macroeconomics, Vol. 2, No. 4, 2010, pp. 158-194.