Abstract
The main objective of the study is to investigate the comparative influence of import and export on economic growth of developing countries in the world, using Export-Led Growth (ELG) and Import-Led Growth (ILG) hypothesis. The study has used purposive sampling technique and selected the member countries of D-8 such as Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey as sample. Total import, total export, and GDP growth rate, as indicator of economic growth, have been used as variables for the study. The study has selected time series and panel data of the variables from year 2001 to year 2015. To detect unit root of variables, Augmented Dickey Fuller (ADF) Test and Phillips-Perron (PP) Unit Root Test have been used. Moreover, the cointegration among variables has been examined using Johansen Cointegration Test. The study has also used Vector Autoregressive (VAR) model and Vector Error Correction (VEC) model to define the presence of short run and long run causality. Finally, Granger Causality Test has been used to examine the presence of unidirectional and bidirectional causality among the variables in short and long-run. The study shows that the variables have unit root at level and have become stationary at first and second difference. In most of the selected countries, the study has found cointegration and unidirectional causality among the variables. In Bangladesh, both import and export have been found to contribute to economic growth in short run, and the relationship is unidirectional. Moreover, these have been found to influence economic growth of Nigeria in long run. On the other hand, the study has discovered economic growth and export of Turkey to granger-cause its import in short and long run. However, along with economic growth, import has been found to granger-cause export of Egypt and Indonesia in short run, and export of Malaysia in long run. Finally, Pakistan and Iran have been found to have no granger-causality among import, export and economic growth.
Highlights
Economic growth of a country or a society is associated with the rising incomes and related increase in consumptions, savings, and investments, which result in market productivity and rise in Gross Domestic Product (GDP)
Short run and unidirectional causality is found from import and GDP growth to export in Indonesia, where only GDP growth is found to granger-cause export in short run
Emergence of foreign trade in developing economies has necessitated answering the question: is growth of developing economy import driven or export driven? The present study has found no single answer to this question
Summary
Economic growth of a country or a society is associated with the rising incomes and related increase in consumptions, savings, and investments, which result in market productivity and rise in Gross Domestic Product (GDP). While studying on the economic growth of developing economy, it is found that foreign trade is undoubtedly the best determinant because it promotes business, reduces poverty, enhances competitiveness and creates employment in countries such as Bangladesh, Indonesia, Malaysia etc. The present study has tried to address the gap and to contribute to further literature through providing important findings It has focused on comparative analysis between ELG and ILG upon eight developing economies. Studying on the causal relationship of import, export, and economic growth of the countries of such association is important because it can provide a new insight to their economy and make a judgment to the benefits of entering into such agreement. The present study has tried to consider the importance and the main objective of this study is to examine the comparative effect of import and export on economic growth of eight developing countries of D-8. It has tried to depict the change in economy of these countries after they make their trade relationship strong through entering in D-8 agreement
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