Causality between Export and Economic Growth: The Empirical Evidence from Shanghai

Abstract

The export-led growth hypothesis is tested using monthly time series data for Shanghai (one of the major exporting provinces in China) using the Granger no-causality procedure developed by Toda and Yamamoto (1995) in a vector autoregresion (VAR) model. Three distinct features in this paper stand out: first, the study of the export-led growth hypothesis using the case of Shanghai is the first attempt. Second, the paper follows Riezman, Whiteman and Summers (1996) to test the hypothesis while controlling for the growth of imports to avoid a spurious causality result; and finally, the use of the methodology by Toda and Yamamoto is expected to improve the standard F-statistics in the causality test process. The research finds a one-way Granger causality running from GDP to exports.