Abstract
The export-led growth hypothesis states a positive relationship between the growth of exports and long-run economic growth. This study examines the validity of the export-led growth hypothesis of services exports in 5 emerging economies, including Brazil, India, Nigeria, China, and South Africa (BINCS), for the period of 1980-2019. The study employs the panel mean group autoregressive distributed lag (ARDL) procedure to identify a causal relationship between services exports and gross domestic product (GDP) per capita. The findings show that the export-led growth hypothesis in services only has a positive effect on economic growth in the short run while other variables, including foreign direct investment (FDI), gross capital formation, and labour, increase economic growth in the long run. Hence, the emerging countries should focus more on internal investment to boost growth in the long and short run.
Highlights
A major desire of every country to promote its economic growth is the reason economists have focused on the examination of the export-led growth (ELG) hypothesis
Since emerging economies including Brazil, India, Nigeria, China, and South Africa began to expand in international trade, their economies have been met by an increase in exports as a percentage of gross domestic product (GDP), leading to rapid economic growth
Due to the growing nature of services in developing countries, the aim of this paper is to examine the relationship between services exports and economic growth for five emerging economies, including Brazil, India, Nigeria, China, and South Africa (BINCS), for the period of 1980-2020
Summary
A major desire of every country to promote its economic growth is the reason economists have focused on the examination of the export-led growth (ELG) hypothesis. The export-led growth hypothesis is among the most argued discussion, and it asserts a positive relationship between exports and real GDP growth in the long run. This implies a shift from import substitution and to export promotion with increased trade openness. Starting from the earlier studies of Balassa (1978) and (1985), empirical investigations have continued to examine the compatibility and validity of the export-led growth (ELG) hypothesis for developed and developing countries. Islam (2020) tested this hypothesis in India and China using a panel causality test and found that export has a positive impact on growth in the long run. The analysis showed that export has a positive effect on economic growth only in the short run with an unidentified effect in the long run
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