Manufactured Exports, Capital Good Imports, and Economic Growth: Experience of Mexico and Brazil

This paper examines the export-led growth hypothesis using data from two Latin American countries, Mexico and Brazil, in a production function framework. It addresses some of the limitations of existing methods of testing the hypothesis. Contrary to popular belief, we do not find any evidence to support the hypothesis. Imported capital goods appear to be very significant in the growth process of these two countries. To check the robustness of the results, this study uses two different cointegrating procedures to determine the number of cointegrating vectors, and three different methods to estimate the parameters of the long-run relations. The results are robust across estimation techniques. [F43, F14, O47, O54]