Abstract
This study uses the Gregory–Hansen cointegration method and the vector error correction model in the vector autoregression system to reveal how international trade contributes to economic sustainability. The Gregory–Hansen test for cointegration method reveals a permanent equilibrium relation among sustainably economic growth, exports, and imports and shows that exports facilitate GDP growth and accelerate improvements in the capability of imports in the long-run. The causality between GDP and exports is unidirectional, indicating that exports area determinant of sustainable economic growth. The bidirectional causality from imports to GDP also sheds light on the important influence of imports on economic sustainability; however, GDP growth also drives import growth. The interaction between imports and exports corresponds to their bidirectional causal relationship, which is indicative of imports contributing to export production and of export growth expanding the capacity for imports. This finding indicates that imports are both exogenous and endogenous factors for exports.
Highlights
Many previous studies have investigated how different variables contribute to economic growth
Based on the empirical study of [6], the results have shown that there is a strong relationship between international trade and sustainable development, which is focused on promoting prosperity and protecting the planet
The International Monetary Fund staff pointed out that international trade has served as an impetus to enhance economic development, and as a result, it has been highlighted that both developing and developed countries have benefited from this economic prosperity, which has brought an increase in income and standard of living, which has benefited the end of poverty
Summary
Many previous studies have investigated how different variables contribute to economic growth. The comparison between exports of traditional basic products, exports of manufactures, and services have skyrocketed substantially in developing countries since they joined the global value chain [8] It is especially evident in the case of the Asian giant, since the market-oriented reforms and the implementation of free trade have obtained higher incomes and achieved accelerated economic growth, depending largely on exports. According to Yang [12], an exogenous increase in the volume of export trade or improvement in the productivity of export sectors mainly drives economic growth, export growth, and real exchange rate appreciation This strategy is beneficial for several developing countries, which expand their product markets wider than their domestic consumer markets. China gains from policies, which promote key sectors of China’s economy; this paper fills the gap and makes the contributions of exports to productivity and sustainable economic growth, as well as a virtuous cycle between GDP, exports, and imports
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