Abstract
Economic theory suggests that export growth promotes economic growth. Yet empirical research has not found clear support for the export‐led growth hypothesis, even for the newly industrialized economies where the theory should be most applicable. This paper provides an explanation for the apparent discrepancy between the theory and the empirical results. It shows that causality inferences on the export‐led growth hypothesis are sensitive to unit roots or near‐unit roots in the time series and to the lag structure chosen for causality tests. Therefore, the issues of unit root and lag structure deserve scrutiny in empirical research.
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