On the relationship between export and economic growth: A nonparametric causality-in-quantiles approach for Turkey

Abstract

ABSTRACTThis study re-examines the dynamic causal relationship between exports and economic growth in Turkey for the period from 1960 to 2018. Unlike the previous studies ignoring the presence of the potential nonlinearities in the relationship between the series; we apply a novel nonparametric causality-in-quantile methodology that relaxes the restrictive assumption of linearity and provides more reliable and inclusive inference in the causal nexus between the variables. Using the nonlinearity test, we show that the absence of causality linkages based on the linear framework is subject to a misspecification error. However, by employing the causality-in-quantiles test, we find evidence of positive causation from economic growth to export growth at low- and high-quantile ranges of export growth. Our findings highlight the emphasis on the modelling of nonlinear interactions between the variables as well as the consideration of the entire conditional distribution to avoid the risk of misleading inferences on the causality analysis.