Korean Exports and Economic Growth: An Econometric Reassessment

Abstract

Controversy has surrounded the role exports play in stimulating economic growth. Some authors find causation from exports to GNP, while others have concluded that exports retard GNP growth. Still others find no causation or find bidirectional causation with the Sims test but not with the Granger test. We employ annual data for a long time period (1953 to 1990) for Korea, enhancing the power of unit root tests. With these data we consistently find two-way exogeneity with the Sims test under progressively longer lead and lag assumptions. Moreover, Granger causality tests also indicate two-way causation. Therefore, at least for institutional settings similar to Korea, considerable confidence can be placed in the hypothesis that export promoting policies will enhance growth prospects.

Keywords: Exports, economic growth, causality, two-way causality, Korean economic growth

JEL Classification: F01, F02, F13, F14, O19, O24, O53