Exports, Imports and Economic Growth: An Empirical Analysis of Tunisia

Qazi Muhammad Hye () and Houda Ben Haj Boubaker

The IUP Journal of Monetary Economics, 2011, vol. IX, issue 1, 6-21

Abstract: The aim of this study is to investigate the export-led growth, import-led growth and foreign debt sustainability hypotheses in the case of Tunisia by using annual time series data for the period 1960-2008. Autoregressive Distributed Lag (ARDL) approach is employed to determine the long-run relationship or direction of long-run causality between exports, imports and GDP, and the strength of causal relationship is examined by using variance decomposition method. The results indicate unidirectional causality from exports to economic growth and bidirectional relationship between imports and economic growth. Thus, both export-led growth and import-led growth are valid for Tunisia. On the other hand, there is bidirectional association between exports and imports. The long-run elasticity of exports with respect to imports is 1.02 and long-run elasticity of imports with respect to exports is 0.86. Thus, foreign debt is weakly sustainable in the case of Tunisia. The empirical findings of the study are important for policy makers of Tunisia in the formulation of trade policies.

Date: 2011
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