Export Growth-economic Growth Nexus: An Empirical Re-examination

The economic literature on the export growth-economic growth causality is a study in contradictions. There is no unanimity among the researchers and by extension policy makers if the causality is uni-directional (and if so in which direction) or bi-directional. We want to revisit this academic quandary with a powerful econometric technique proposed by Pedroni (2004) where he introduces pooling of economic data which allows for one to vary the degree of heterogeneity among the panel members. It examines both the between dimension and within dimension residuals. The strength of this test is that the resultant “test statistic” is able to accommodate short run dynamics, deterministic trends and also different slope coefficients. This test statistic is “standard normal’ and free of nuisance parameters. We want to include many countries over a long period of time, which will help increase the credibility of the test results. We will use data for OECD countries for the post World War II time period. We will start with stationarity characteristics of the data and then apply the Pedroni panel cointegration methods. We hope to shed some light on the export growth-economic growth relationship.