Academic journal article Journal of Emerging Trends in Economics and Management Sciences

Impact of Exports and Imports on Economic Growth: Evidence from Tunisia

Academic journal article Journal of Emerging Trends in Economics and Management Sciences

Impact of Exports and Imports on Economic Growth: Evidence from Tunisia

Article excerpt

Abstract

In this paper we investigated the impact of exports and imports on the economic growth of Tunis over the period 1977-2012. The study used Granger Causality and Johansen Cointegration approach for long run relationship Using Augmented Dickey-Fuller (ADF) and Phillip-Perron (PP) stationarity test, the variable proved to be integrated of the order one 1(1) at first difference. Johansen and Juselius Cointegration test was used to determine the presence or otherwise of a cointegrating vector in the variables. To determine the direction of causality among the variables, at least in the short run, the Pairwise Granger Causality was carried out. Economic growth was found to Granger Cause import and Export was found to Granger Cause import. The results show that there is unidirectional causality between exports and imports and between exports and economic growth. These results provide evidence that growth in Tunisia was propelled by a growth -led import strategy as well as export led import. Imports are thus seen as the source of economic growth in Tunisia.

Keywords: Co integration, Granger causality; Exports; Imports; Economic growth;

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

It has been theoretically argued that both export and import may play a crucial role in economic development. The theoretical and empirical studies mainly concentrate on either the relationship between export and growth or between import and growth or the association between export, import and economic growth.

The export-led growth hypothesis (ELGH) assumes that export advancement is one of the key indicators of growth. It encourages that the overall progress of countries can be achieved not only by mounting the quantity of manpower and investment within the economy, but also by increasing exports.

Another relationship of causality from growth to export is called growth-led exports and it tells that there is unidirectional causality from economic growth to exports but not vice versa. There is also a possibility of two way causality link from exports to growth and from growth to exports.

This paper contributes to the literature in the following ways. First, previous studies focus mainly on the interactions between exports and economic growth. Recognizing the role of imports on economic growth and possibly on export activities of a country, this paper empirically examine the relationship between exports and economic growth in a multivariate framework with the introduction of an additional relevant variable, imports. Second, this study will use cointegration test to investigate for the presence of a long-run relationship. To investigate for cointegrating relationship between exports and economic growth, previous papers use mainly Engle and Granger (1987), Johansen (1988) and Johansen and Juselius (1990) approaches. However, this study will test of the impact of exports and imports on the economic growth of Tunis over the period 19772012.

The aim of this paper, therefore, is to econometrically investigate direct linkages among trade and economic growth for Tunis. by employing yearly data for the period 1977-2012. In particular, this work tries to empirically find an answer for the question of whether export leads economic growth or of whether import lead economic growth or economic growth leads export and import.

To achieve this objective the paper is structured as follows. We discuss the Methodology, Model Specification and Data used in this study in Section 3. Section 4 presents the empirical results as well as the analysis of the findings. Section 5 provides our conclusion.

LITERATURE REVIEW THEORY AND APPLICATION

The relationship between import, export and economic, has been a subject matter for a substantial body of empirical work. Their nexus is usually investigated in the empirical literature in two different lines: The first line of the existing empirical research attempt to separately examine the importance of export or import on economic growth, the second line of the empirical works examines the relationship between export and import collectively. …

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