The Causal Relationship between Exports, Imports and Economic Growth in Palestine

Zahra' Fannoun, Islam Hassouneh

Abstract


The relationship between exports, imports and economic growth is investigated for the Palestinian economy over the period 2000-2018, using quarterly data. To do so, cointegration test using Johansen's approach as well as vector error correction technique are used. Findings confirm the presence of long-run equilibrium relationship between exports, imports and output growth. Results also support the existence of bidirectional long-run causality between exports, imports and output growth. As for the short-run causality, findings support both the export-led import and the import-led export hypotheses. Further, imports are found to Granger cause economic growth. Policy makers should be aware of the importance of trade to stimulate economic growth.


Keywords


Exports, imports, economic growth, cointegration, VECM.

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ISSN: 1929-7092