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Empirical Economics

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02-02-2018

Are exports a reliable source of economic growth in MENA countries? New evidence from the rolling Granger causality method

Authors: Salah Abosedra, Chor Foon Tang

Published in: Empirical Economics | Issue 3/2019

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Abstract

Earlier investigations have concentrated on the effect of export expansion on economic growth while ignoring the importance of the stability of such relationship. This paper re-investigates empirically the export-led growth (ELG) hypothesis for five countries in the MENA region: Egypt, Jordan, Morocco, Tunisia, and Turkey, using the Granger causality technique. This study covers the sample period from 1980:Q1 to 2012:Q4. With the full sample, we find evidence supporting the ELG hypothesis only in Jordan, Morocco, and Turkey. Nonetheless, our time-varying Granger causality results have significantly validated the evidence of instability of the ELG hypothesis in these MENA countries. Therefore, changes in policies and regulations to improve the export sector of these countries will not ultimately pay off in terms of achieving high rates of stable economic growth in these countries. Policymakers in these countries should search for the alternative catalyst of growth to continuously as well as to effectively promote long-term economic growth in these countries.

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To shed some more light on the selection of appropriate lag, we also use another system-wide information criterion such as Final Prediction Error (FPE), Schwarz Information Criterion (SIC), and Hannan–Quinn Information Criterion (HQ) to affirm the best lag structure for our VAR models. The SIC statistic suggests that VAR models with 2 lags should be the best model, but FPE and HQ consistently suggest that VAR models with 6 lags should be the best structure for all countries under investigation. Owing to such inconsistent suggestion, we follow Hatemi-J and Hacker’s (2009) recommendation to use the likelihood ratio (LR) test to pick the most appropriate lag structure for our VAR systems. We find that the LR test consistently rejects the null hypothesis of 2 lags at the 1% significant level for all countries, implying that VAR system with 6 lags is more appropriate in the context of our study.

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Title: Are exports a reliable source of economic growth in MENA countries? New evidence from the rolling Granger causality method
Authors: Salah Abosedra
Chor Foon Tang
Publication date: 02-02-2018
Publisher: Springer Berlin Heidelberg
Published in: Empirical Economics / Issue 3/2019
Print ISSN: 0377-7332
Electronic ISSN: 1435-8921
DOI: https://doi.org/10.1007/s00181-017-1374-7

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