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

Authors

  • Zahra' Fannoun College of Business Administration, Hebron University, P.O. Box 40, Hebron
  • Islam Hassouneh College of Administrative Science and Informatics, Palestine Polytechnic University (PPU), P.O. Box 198, Abu Ruman, Hebron

DOI:

https://doi.org/10.6000/1929-7092.2019.08.22

Keywords:

Exports, imports, economic growth, cointegration, VECM.

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.

References

Abou-Stait, Fouad. 2005. ""Are exports the engine of economic growth? An application of cointegration and causality analysis for Egypt."" Economic Research Working Paper series 76.
Abu-Shihab, Ruba, Thikraiat Soufan and Shatha Abdul-Khaliq. 2014. ""The causal relationship between exports and economic growth in Jordan."" International Journal of Business and Social Science 5(3): 302-308.
Asafu?Adjaye, John and Debasish Chakraborty. 1999. ""Export?led growth and import compression: further time series evidence from LDCS."" Australian Economic Papers 38(2): 164-175.
https://doi.org/10.1111/1467-8454.00049
kter, Maimuna and Md Nahid Bulbul. 2017. ""Comparative analysis between export-led growth and import-led growth: a study on developing eight (d-8)."" Science Puplishing Group 5(4): 204-212.
Awokuse, Titus O. 2005. ""Exports, economic growth and causality in Korea."" Applied Economics Letters 12(11): 693-696.
https://doi.org/10.1080/13504850500188265
Awokuse, Titus O. 2007. ""Causality between exports, imports, and economic growth: evidence from transition economies."" Economics Letters 94(3): 389-395.
https://doi.org/10.1016/j.econlet.2006.08.025
Bakari, Sayef and Mohamed Mabrouki. 2017. ""Impact of exports and imports on economic growth: new evidence from Panama."" Journal of Smart Economic Growth 2(1): 67-79.
Bakari, Sayef. 2016. ""Impact of exports and imports on economic growth in Canada: empirical analysis based on causality."" MPRA Paper75910.
Çetinta?, Hakan and Salih Bari?ik. 2009. ""Export, import and economic growth: the case of transition economies."" Transition Studies Review 15(4): 636-649.
https://doi.org/10.1007/s11300-008-0043-0
Chokri, Terzi, Anis El Ammari and Ali Bouchrika. 2018. ""Optimal Taxation and Economic Growth in Tunisia: Short and Long Run Analysis."" Journal of Reviews on Global Economics 7: 157-164.
https://doi.org/10.6000/1929-7092.2018.07.14
Damooei, Jamshid and Akbar Tavakoli, A. 2006. ""The effects of foreign direct investment and imports on economic growth: a comparative analysis of Thailand and the Philippines (1970–1998)"". The Journal of Developing Areas 39(2): 79-100.
https://doi.org/10.1353/jda.2006.0002
Dickey, David. and Wayne A. Fuller. 1979. ""Distribution of the Estimators for Autoregressive Time Series With a Unit Root.""?Journal of the American Statistical Association 74(366): 427-431.
https://doi.org/10.2307/2286348
El Alaoui, Aicha. 2015. ""Causality and cointegration between export, import and economic growth: evidence from Morocco."" Journal of World Economic Research 4(3): 83-91.
https://doi.org/10.11648/j.jwer.20150403.14
Enders, Walter. 1995. Applied Econometric Time Series. Iowa: Iowa State University.
Engle, Robert F. and C. W. J. Granger. 1987. ""Cointegration and error correction: representation, estimation and testing."" Econometrica 55(2): 251-276.
https://doi.org/10.2307/1913236
Ferrucci, Gianluigi, Rebeca Jiménez-Rodríguez and Luca Onorantea. 2012. ""Food Price Pass-Through in the Euro Area: Non-Linearities and the Role of the Common Agricultural Policy."" International Journal of Central Banking, 8(1): 179-217.
Ghartey, Edward. 1993. ""Causal relationship between exports and economic growth: some empirical evidence in Taiwan, Japan and the US."" Applied economics 25(9): 1145 -1152.
https://doi.org/10.1080/00036849300000175
Guntukula, Raju. 2018. ""Exports, imports and economic growth in India: evidence from cointegration and causality analysis."" University of Hyderabad, India 2(615): 221-230.
Hashem, Khairul and Mansur Masih. 2014. ""What causes economic growth in Malaysia: exports or imports?"" MPRA Paper 62366.
Hassouneh, Islam, Teresa Serra and José M. Gil. 2010. ""Price transmission in the Spanish bovine sector: the BSE effect."" Agricultural Economics 41(1): 33-42.
https://doi.org/10.1111/j.1574-0862.2009.00423.x
Hassouneh, Islam, Carsten Holst, Teresa Serra, Stephan von Cramon-Taubadel and José M. Gil, 2015. ""Overview of Price Transmission and Reasons for Different Adjustment Patterns across EU Member States"". Chapter 3 in S. McCorriston (ed). Food Price Dynamics and Price Adjustment in the EU. Oxford University Press, Oxford.
https://doi.org/10.1093/acprof:oso/9780198732396.003.0003
Heckscher, Eli. 1919. ""The effects of foreign trade on the distribution of income."" Ekonomisk Tidskrift 21: 497-12.
Helpman, Elhanan and Paul R. Krugman. 1985. Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition and The International Economy. MIT Press: Cambridge, MA.
Hye, Qazi Muhammad Adnan. 2012. ""Exports, imports and economic growth in China: an ARDL analysis."" Journal of Chinese Economic and Foreign Trade Studies 5(1): 42-55.
https://doi.org/10.1108/17544401211197959

Hye, Qazi Muhammad Adnan, Shahida Wizarat and Wee-YeapLau. 2013. ""Trade-led growth hypothesis: an empirical analysis of South Asian countries."" Economic Modelling 35: 654-660.
https://doi.org/10.1016/j.econmod.2013.07.040
Iscan, Talan. 1998. ""Trade liberalization and productivity: a panel study of the Mexican manufacturing industry."" The Journal of Development Studies 34(5): 123-148.
https://doi.org/10.1080/00220389808422539
Islam, Muhammed N. 1998. ""Export expansion and economic growth: testing for cointegration and causality."" Applied Economics 30: 43 – 423.
https://doi.org/10.1080/000368498325930
Johansen, Søren. 1988. ""Statistical analysis of cointegration vectors."" Johansen of Economics Dynamics and Control 12: 231-254.
https://doi.org/10.1016/0165-1889(88)90041-3
Kalaitzi, Athanasia S and Emmanuel Cleeve. 2017. ""Export-led growth in the UAE: multivariate causality between primary exports, manufactured exports and economic growth."" Eurasian Business Review 8(3): 341–365.
https://doi.org/10.1007/s40821-017-0089-1
Kim, Sangho, Hyunjoon Lim and Donghyun Park. 2007. ""Could imports be beneficial for economic growth: some evidence from republic of Korea."" ERD working paper series 103.
Krugman Paul R. 1984. Import Protection as Export Promotion. In: Kierzkowski, H. (Ed.), Monopolistic Competition in International Trade. Oxford: Oxford University Press.
Kubo, Akihiro. 2011. ""Trade and economic growth: Is export-led growth passé?"" Economics Bulletin 31(2): 1623–1630.
Kwiatkowski, Denis, Peter C.B. Phillips, Peter Schmidt and Yongcheol Shin. 1992. ""Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root."" Journal of Econometrics 54: 159-178.
https://doi.org/10.1016/0304-4076(92)90104-Y
Lawrence, Robert Z. and David E. Weinstein. 1999. ""Trade and growth: import-led or export-led? evidence from Japan and Korea."" NBER Working Papers 7264.
Lütkepohl, Helmut. 2005. New introduction to multiple time series analysis. Springer-Verlag, Berlin.
https://doi.org/10.1007/978-3-540-27752-1
Maina, Rufus Marundu. 2008. ""The effect of exports and imports on economic growth: empirical evidence from Kenya."" The university of Nairobi (UoN) D61(71539).
MacKinnon, James G. 1991. Critical values for cointegration tests. in R.F. Engle and C. W. J. Granger (eds), Long Run Economic Relationships, Oxford University Press, 267-276.
Mankiw, N. Gregory. 2016. Principles Of Microeconomics. USA: Cengage Learning.
Ohlin, Bertil. 1933. Interregional and International Trade. Cambridge: Harvard University Press.
PCBS. 2018. Dataset. http://www.pcbs.gov.ps/. Accessed October 2018.
Phillips, Peter C. B. and Pierre Perron. 1988. ""Testing for a unit root in time series regression."" Biometrika 75(2): 335-346.
https://doi.org/10.1093/biomet/75.2.335
Prakash, Shri and Sonia Anand. 2014. ""Impact of growth on factor endowment and structure of India's trade."" IOSR Journal of Economics and Finance 5(5): 53-66.
https://doi.org/10.9790/5933-0555366
Ramos, Francisco F. Ribeiro. 2001. ""Exports, imports, and economic growth in Portugal: evidence from causality and cointegration analysis."" Economic Modelling 18(4): 613-623.
https://doi.org/10.1016/S0264-9993(00)00055-9
Ricardo, David. 1817. On the Principles of Political Economy and Taxation. London: John Murray.
Ronit, Mukherji and Pandey Divya. 2014. ""The relationship between the growth of exports and growth of gross domestic product of India."" International Journal of Business and Economics Research 3 (3): 135-139.
https://doi.org/10.11648/j.ijber.20140303.13
Saaed, Afaf Abdull J and Majeed Ali Hussain. 2015. ""Impact of exports and imports on economic growth: evidence from Tunisia."" Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 6(1): 3-21.
Sachithra, K. M. V., G. A. C Sajeevi, M. P. K. Withanawasm and W. M. S. A. Jayathilake. 2012. ""Comparative advantage in international trade: a study based on leading exports in Sri Lanka."" Kelaniya Journal of Management 1(2): 51-85.
https://doi.org/10.4038/kjm.v1i2.6453
Sharma, Susan Sunila and Russell Smyth. 2009. ""Is economic growth export-led or import-led in the pacific island countries? Evidence from panel data models."" Monash University Development Research Unit Discussion Paper 9-15.
Smith, Adam. 1776. An Inquiry into the Nature and Causes of the Wealth of Nations. Edited by S. M. Soares. MetaLibri Digital Library, 2007.
Ucan, Okyay, Abdulmenaf Akyildiz and Maimaitiaili Maimaitimansuer. 2016. ""The relationship between export and economic growth in Turkey."" European Scientific Journal (1):61-70.
U?ur, Ahmet. 2008. ""Import and Economic Growth in Turkey: Evidence from Multivariate VAR Analysis."" East-West Journal of Economics and Business 11(1-2): 54-75·
Vardari, Msc. Luan. 2015. ""Relationship between import-exports and economic growth: the Kosova case study."" Revista Shkencore Regjionale (REFORMA) 3: 262-269.
https://doi.org/10.2139/ssrn.2889731
Velnampy, T and Achchuthan, S. 2013. ""Export, import and economic growth: evidence from Sri Lanka."" Journal of Economic and Sustainable Development 4(9): 147-155.
Vijayasri, G. V. 2013. ""The importance of international trade in the world."" International Journal of Marketing, Financial Services & Management Research 2(9): 111-119.
Tsen, Wong Hock. 2007. ""Export, domestic demand and economic growth: some empirical evidence of the Middle East countries."" Journal of Economic Cooperation 28(2): 57-82.
World Bank. 2017. Unlocking the trade potential of the Palestinian economy: immediate measures and a long-term vision to improve Palestinian trade and economic outcomes (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/960071513228856631/Unlocking-the-trade-potential-of-the-Palestinian-economy-immediate-measures-and-a-long-term-vision-to-improve-Palestinian-trade-and-economic-outcomes. Accessed January 2019.
Zang, Wenyu and Mark Baimbridge. 2012. ""Exports, imports and economic growth in South Korea and Japan: a tale of two economies."" Applied Economics 44(3): 361-372.
https://doi.org/10.1080/00036846.2010.508722

Downloads

Published

2019-03-12

How to Cite

Fannoun, Z., & Hassouneh, I. (2019). The Causal Relationship between Exports, Imports and Economic Growth in Palestine. Journal of Reviews on Global Economics, 8, 258–268. https://doi.org/10.6000/1929-7092.2019.08.22

Issue

Section

Articles