Export composition and growth of selected low-income African countries: evidence from time-series data

This paper examines the hypothesis that economic growth is linked to export composition with the use of time-series data for some low-income African countries. On the basis of the regression results, the study supports the hypothesis of a positive linkage between the growth of non-fuel primary exports and growth. However, the results cast some doubt on the significance of the positive contribution of the manufactured exports sector to the growth process of the low-income African countries.     

Little Divergence: Evidence from Cotton Textiles in Japan and China 1868–1930

This paper looks at the role of textile exports in Japan and China's economic development in the period of 1868–1930 as a major explanation for the “Little Divergence” between the two countries in the context of the “Great Divergence” between Europe and Asia. Because of textiles' large weighting in proto‐industrialization gross domestic product (GDP), we postulate that China's initial 20‐year lag in textiles vis‐à‐vis Japan turns out to be fatal for its industry and that it eventually ordains totally different development patterns for the textile industry in the two countries, which ultimately led to different growth patterns for the overall economy. Although both countries saw rapid growth of textile exports, the nature of those exports and the entailed position of each country in the industry value chain of trade were quite different. We then use Granger causality tests to show that in one case (Japan) it is in support of the export‐led‐growth hypothesis (ELG) while in another (China) it is not. Our study then also explains why Japan's industrial revolution took place much earlier than China's.     

ON EXPORT-LED GROWTH IN AUSTRALIA AND CANADA: COINTEGRATION, CAUSALITY AND STRUCTURAL STABILITY*

This paper uses cointegration and vector-error correction (VEC) modelling to investigate whether the export-led growth hypothesis applies to Australian and Canadian exports and labour productivity. The Johansen (1988) procedure is used to test whether manufacturing and aggregate measures of exports and labour productivity are cointegrated. Exports and labour productivity are found to be cointegrated, suggesting the export-led growth hypothesis holds for the small, open Australian and Canadian economies, although the estimated cointegrating vectors suggest the relationship is of small order. The tests suggested in Hansesn (1992), for parameter stability in relationships with I(1) variables, are estimated to examine if the parameters estimated from the Johansen procedure are unstable and whether the null of cointegration can be rejected in favour of structural change. No evidence is found of parameter instability in either the Australian or Canadian long-run relationships at conventional significance levels. Estimation of VEC models suggests that exports are seen to cause productivity growth, although the quantitative impacts are again small. The reverse causality is rejected for both countries, except for the Canadian manufacturing sector for which there is a small, significant positive effect of labour productivity on manufactured exports.     

Exports and economic growth: Further evidence

This paper investigates the relationship between exports and economic growth in a group of eleven developing countries that have already established an industrial base. Separate consideration is given to manufactured and to total exports; in the case of the latter, adjustment is made for domestic and foreign investment and for increases in the labor force.     

Structural transformation and growth of merchandise trade of low-income economies 1980–1992

The Heckscher-Ohlin Vanek theorem, which predicts a direct relationship between exports and greater supply of factors used to produce those exports, performs only 50 percent of the time. However, there is no alternative theory which explains such a relationship. This paper analyzes the growth of merchandise trade of low-income countries, with particular reference to the growth of exports and net exports as these countries move from the predominantly agricultural goods producing era to the manufactured goods producing era. Results suggest, among other things, that industrial structure and governmental policies play an important role in the growth of merchandise trade.     

The new goods margin in new markets

We analyze the role of the new goods margin in the Baltic countries’ exports and imports growth during the 1995–2008 period. Using the methodology developed in Kehoe and Ruhl (2013), we define the set of least-traded goods as those that account for the lowest 10% of total exports and imports in 1995, and then trace its growth in several markets including the Baltics’ main trade partners, the European Union and Russia. We find that, on average, by 2008 least-traded goods accounted for nearly 50% of total Baltic exports to their main trade partners. Moreover, we find that increases in the share of least-traded exports coincided with the timing of the trade liberalization reforms implemented by the Baltic countries. Least-traded imports also grew at robust rates, but their growth was lower than that of exports, accounting for slightly less than a quarter of total imports, that is, about half of the exports value. Moreover, we find that the shares of least-traded imports from the EU 15 and from Russia started diverging around the time the Baltic countries joined the EU, with the EU 15 share increasing and the Russian one declining. We also find that the Baltics’ share of least-traded exports outpaced that of other economies in Central and Eastern Europe. Finally, exports of new goods from the Baltic countries suffered noticeably during the Global Financial Crisis. After the crisis ended, the restart in new goods exports growth displayed mixed patterns.     

Exchange rate undervaluation and manufactured exports: A deliberate strategy?

Recent literature suggests that a proactive exchange rate policy in accordance with price incentives (i.e. undervaluation) can foster manufactured exports and growth. This paper is built on these recent developments and investigates, using a sample of 52 developing countries, whether such a proactive exchange rate policy is adopted. The results show that during the period 1991–2005 a number of countries has used undervaluation to foster the price competitiveness of manufactured exports.     

The engine of growth or its handmaiden?

This paper presents an analysis of time-series data for the countries in the Summers-Heston (1991) data set, in an attempt to ascertain the evidence for or against the export-led growth hypothesis. We find that standard methods of detecting export-led growth using Granger-causality tests may give misleading results if imports are not included in the system being analyzed. For this reason, our main statistical tool is the measure of conditional linear feedback developed by Geweke (1984), which allows us to examine the relationship between export growth and income growth while controlling for the growth of imports. These measures have two additional features which make them attractive for our work. First, they go beyond meredetection of evidence for export-led growth, to provide a measurement of itsstrength. Second, they enable us to determine the temporal pattern of the response of income to exports. In some cases export-led growth is a long-run phenomenon, in the sense that export promotion strategies adopted today have their strongest effect after eight to 16 years. In other cases the opposite is true; exports have their greatest influence in the short run (less than four years). We find modest support for the export-led growth hypothesis, if “support” is taken to mean a unidirectional causal ordering. Conditional on import growth, we find a causal ordering from export growth to income growth in 30 of the 126 countries analyzed; 25 have the reverse ordering. Using a weaker notion of “support”—stronger conditional feedback from exports to income than vice versa, 65 of the 126 countries support the export-led growth hypothesis, although the difference in strength is small. Finally, we find that for the “Asian Tiger” countries of the Pacific Rim, the relationship between export growth and output growth becomes clearer when conditioned on human capital and investment growth as well as import growth.     

THE EXPORT PERFORMANCE OF U.S. AND SWEDISH MULTINATIONALS

While the U.S. and Sweden both lost more than 20 percent of their shares of world and developed countries' exports of manufactures between the mid-1960s and mid-1980s, the export shares of their multinational firms stayed fairly stable or even increased. The multinationals raised the proportion of their worldwide exports that they supplied from their overseas affiliates. These developments suggest that the declines in the trade shares of the US. and Sweden were not due mainly to deterioration in the innovativeness or inventiveness of American and Swedish firms, their management ability or their technological capabilities, but rather to economic developments in the firms' home countries.
The finding that firms have done better as exporters than their home countries is strengthened when we look at different industry groups. In both the U.S. and Sweden, and in all industry groups, with one exception, the multinationals' export shares increased relative to those of their home countries. The margins were often wide, and were mostly larger for Swedish firms than for U.S. firms.
Part of the explanation for the growth of each country's exports and those of its multinationals is the initial composition of exports, or the comparative advantages of the countries and their firms. These were skewed, in the mid-1960s, to industries that were to enjoy rapid growth in the next decade or so. Despite these initial comparative advantages, the exports of both countries fell far behind world export growth.
The comparative advantages of both countries' multinationals were even more biased toward fast-growth industries than those of the countries. That fact partly accounted for the better export performance of the multinationals relative to their home countries, but the multinationals outperformed their countries within each industry as well as for manufacturing as a whole.     

Asymmetric effects of financial development on South-South and South-North trade: Panel data evidence from emerging markets

Using bilateral trade data in total and technology-and-skill-intensive manufactured goods for 28 developing countries that account for 82% of all developing country manufactures exports between 1978 and 2005, this paper explores the effects of financial development on the pattern of specialization in South-South and South-North trade. The empirical results using dynamic panel regressions and comprehensive sensitivity tests suggest that financial development in the South has an economically and statistically significant positive effect on the share of total and technology-and-skill-intensive manufactures exports in GDP, and total exports in South-South trade. In contrast, no such significant or robust effect of financial development is found in South-North trade. Overall, the positive effect of financial development is found to be asymmetric favoring South-South significantly more than South-North trade. In addition, financial development is found to be increasing technology-and-skill-intensive manufactured goods exports significantly more than total manufactured or merchandise goods exports.     

Habit persistence and the structure of international commodity trade

The paper analyzes the commodity structure of exports and imports of nine industrialized countries, using a dynamic version of the Linear Expenditure System. The hypothesis implied by this approach is that the structure of commodity trade can be explained by a combination of habit persistence and constant marginal expenditure shares. Application of the model to the trade composition of nine countries shows that there are considerable differences in the strength of habit persistence across countries and across commodity groups as well as between exports and imports. These are crucial for the explanation of the associated expenditure and price elasticities.     

A further examination of the export-led growth hypothesis

This article challenges the common view that exports generally contribute more to GDP growth than a pure change in export volume, as the export-led growth hypothesis predicts. Applying panel cointegration techniques to a production function with non-export GDP as the dependent variable, we find for a sample of 45 developing countries that: (i) exports have a positive short-run effect on non-export GDP and vice versa (short-run bidirectional causality), (ii) the long-run effect of exports on non-export output, however, is negative on average, but (iii) there are large differences in the long-run effect of exports on non-export GDP across countries. Cross-sectional regressions indicate that these cross-country differences in the long-run effect of exports on non-export GDP are significantly negatively related to cross-country differences in primary export dependence and business and labor market regulation. In contrast, there is no significant association between the growth effect of exports and the capacity of a country to absorb new knowledge.     

Preferential trade agreements and manufactured goods exports: does it matter whom you PTA with?

This article explores two questions. First, do preferential trade agreements (PTAs) affect manufactured goods exports of developing countries? Second, does it matter for developing countries whom they sign the PTAs with? We find that the answer to both questions is yes. Using bilateral manufactured goods exports data from 28 developing countries during 1978–2005; we find that South–South PTAs have a significantly positive effect on manufactured goods exports. In contrast, no such effect is detected in the case of South–North PTAs. We confirmed the robustness of these findings to estimation methodology, sample selection, time period, zero trade flows and multilateral trade resistance.     

Impact of oil price changes on Turkey’s exports

Substantial decline in oil prices observed since the second half of 2014 has brought forward discussions on the impact of oil prices on the external balance. This decline is expected to shift real income from oil exporter countries to oil importer countries. In this context, we study the effect of change in oil prices on Turkey’s exports taking into account the fact that Turkey’s export to oil exporting countries has approximately one-third share in total exports, while export to oil importing countries has a share of two-thirds. At the first step, we analyse the effect of oil prices on economic growth of trade partners of Turkey, where countries are grouped according to their net oil export position. We find that the effect of oil prices on different country groups’ growth is asymmetric. In the second stage, for two groups of countries, we estimate growth-export elasticity through Turkey’s export demand function. Finally, we calculate the net effect of oil prices on exports considering different income effects caused by oil price change on each country groups. Results indicate that the net effect of oil prices on the exports is limited given the current export shares.     

Export-led Growth and Import Compression: Further Time Series Evidence From LDCs

This paper conducts tests of the export-led growth and the import-compression hypotheses for four less developed countries (LDCs) – India, Nigeria, Fiji and Papua New Guinea (PNG). Based on Johansen's multiple cointegration test preceded by unit root tests, we test for cointegration between real output, exports and imports. Non-rejection of cointegration between the variables excludes the possibility of Granger non-causality and suggests at least one way Granger causality. Real output, exports and imports are found to be cointegrated in two of the countries and the resulting error-correction models suggest that Granger causality runs from exports and imports to real output in these cases. Exogeneity tests are conducted for exports with respect to real output. However, while the assumption of weak exogeneity is validated in two of the countries, the null hypothesis of super exogeneity is rejected. The test results therefore cast doubts on policy recommendations for the LDCs based on the export-led growth hypothesis.     

Export Growth and Domestic Performance

A VAR approach is used to analyze the effects of export growth on the evolution of GDP, domestic employment, and investment in 39 economies. The results strongly support the export-led growth hypothesis. Export growth affects GDP growth positively in 30 countries. In six countries, all of them inward-looking, the effects are negative. For these countries, and for these countries alone, export growth has a negative effect on the evolution of both domestic employment and investment. This also suggests the importance of the indirect effects of exports on GDP growth.     

The impact of technological opportunity on the dynamics of trade performance

The paper examines statistically whether the degree to which countries are specialised in and/or increasingly move into sectors with above average levels of technological opportunity has any impact on growth in aggregate market shares of exports. A novelty of the paper is that it applies structural decomposition (SD) analysis not only on trade statistics, but also on US patent statistics. Nineteen countries and 17 manufacturing sectors for the period 1965–1988 are considered. A number of variables, in addition to the effects from the SD analysis, are included as explanatory variables. In this context, it is shown that there is a positive relationship between trade performance and the individual country’s ability to move into technological sectors offering above average technological opportunity.     

HOW THE GLOBALIZATION OF R&D COMPETITION AFFECTS TRADE AND GROWTH

The implications of international R&D competition on trade and growth are investigated. The model is one in which a separate R&D sector competes with the manufacturing sector to secure human capital, and technology is licensed to manufacturers by the winner of a pre-emptive R&D competition. The results show that globalization of R&D competition leads to trade between countries (even identical countries), because the result of competition leads to a reallocation of human capital between sectors. The winning country exports technology and traditional goods, while the loser exports manufactured goods. Globalization with indiscriminate technology licensing increases the world's economic growth rate.     

Structural change in exports and economic growth: cointegration and causality analysis for Spain (1961–2000)

The Spanish export-led growth hypothesis is re-examined from the trade liberalization process initiated four decades ago. For this purpose both the export expansion and the progression from ‘traditional’ exports to manufactured and semimanufactured exports are taken into consideration. A new evidence is reported for the above period. Alongside a feedback between aggregate exports and real output, it has been proved that the structural transformation in export composition has also become a key factor for Spain's economic development.     

The Dark Side of the Generalized System of Preferences

The Generalized System of Preferences (GSP) was established to promote the exports of low‐income countries to industrialized countries in order to support their economic growth and development. However, the design of these schemes is rather complex and the effects of GSP have been found to be controversial. In our empirical analysis, based on an extensive dataset covering most of world trade, we find that GSP tends to foster developing countries' exports in the short‐run, but hampers them in the long‐run. Also, GSP granting countries are able to promote their own exports initially, while in the long‐run their exports decrease. Taken together, GSP does not seem to be a suitable instrument to promote sustainable economic growth and development of low‐income countries.