Exports and growth: Granger causality analysis on OECD countries with a panel data approach

Abstract

This paper investigates the possibility of Granger causality between the logarithms of real exports and real GDP in twenty-four OECD countries from 1960 to 1997. A new panel data approach is applied which is based on SUR systems and Wald tests with country specific bootstrap critical values. Two different models are used. A bivariate ( GDP–exports) model and a trivariate ( GDP–exports–openness) model, both without and with a linear time trend. In each case the analysis focusses on direct, one-period-ahead causality between exports and GDP. The results indicate one-way causality from exports to GDP in Belgium, Denmark, Iceland, Ireland, Italy, New Zealand, Spain and Sweden, one-way causality from GDP to exports in Austria, France, Greece, Japan, Mexico, Norway and Portugal, two-way causality between exports and growth in Canada, Finland and the Netherlands, while in the case of Australia, Korea, Luxembourg, Switzerland, the UK and the USA there is no evidence of causality in either direction.