Abstract
This paper explores the relationship between export, import, and output for Thailand over the period from 1990 to 2017. The threshold vector autoregressive (VAR) and threshold vector error correction (VEC) models were applied. The empirical evidence confirms that the export-led growth hypothesis is valid, implying feedback within the export–output growth nexus. During business cycles, the export–output characteristics in economic cycles can be classified by the two-threshold VAR and VEC models. These relevant variables converge from the long-run equilibrium. As for the thresholds which are correlated, gross domestic product (GDP) vs. export and GDP vs. import exist as a long-run equilibrium relationship, while there does not seem to be a relationship of export vs. import. Furthermore, a five-year forecast was created (the period of 2018–2022). The export–output growth scenarios appear to swing upward continuously throughout the short-term trend. Therefore, policy-makers should highlight countercyclical macroeconomic policies at lower, medium, and upper regimes to strengthen the state of recovery and encourage the state of short recession.
Highlights
The role of outward-orientation policies in economic growth for developing countries was an important issue for debate in the past few decades
In order to determine whether the underlying series contained unit roots or not, the Dickey–Fuller generalized least squares (DF-GLS) test proposed by Elliott et al (1996) was firstly conducted under the null hypothesis of a unit root
The DF-GLS method, which is transformed through a generalized least squares (GLS) for residuals, improves the power of the augmented Dickey–Fuller test in case there is a tendency to be closely stationary given that the sample size is small and an unknown mean or trend is presented
Summary
The role of outward-orientation policies in economic growth for developing countries was an important issue for debate in the past few decades. Their comprehensive consequences remain a great controversy. Thailand recently enhanced and promoted intensive advancement in the export–output growth nexus. As a result of policies favoring outward-oriented growth, Thailand encounters many challenges, especially during global economic crises such as the 1997 Asian financial crisis or the 2007 sub-prime mortgage recession in the United States (US) that spread at a rapid pace to the economy. A large number of empirical studies were previously carried out on the causal effect of outward-oriented trade policies on economic growth. More recent ELG studies were devoted to the neoclassical production approach by adopting sophisticated econometric models (Yamada 1998; Awokuse and Christopoulosb 2009; Liu and Zhang 2015)
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