Testing for the Imports-Led Growth and the Growth-Led Imports Hypotheses in Panels for the Small Island World

Jean-François Hoarau and Nicolas Lucic
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Nicolas Lucic: CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion

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Abstract: This article aims at analysing the empirical relationship between real merchandise imports per capita and real GDP per capita for a set of 17 affiliated and 35 sovereign small islands over the period 1970-2019. Noting the lack of long time series for GDP per capita contrary to imports per capita, the goal is to check whether real imports per capita could be considered as a good predictor for standards of living for the small islands world in accordance with the theoretical claims. To this regard, we test for the imports-led growth and the growth-led imports hypotheses by running in a panel data framework both the Toda-Yamamoto Granger causality test based on VAR modelling, and the Pooled Mean Group estimator based on ARDL modelling. Finally, bidirectional causality holds in the short and the long-run for the group of sovereign small islands, giving strong support to the two hypotheses. However, even if in the short-run bidirectional causality seems to exist, only the growth-led imports hypothesis is validated in the long-run for the affiliated small islands. Anyway, our results state that a high level of imports per capita could be considered as a good predictor for a high level of standards of living for small islands.

Date: 2023
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Published in Revue d'économie politique, 2023, 133 (4), pp.569-600. ⟨10.3917/redp.334.0569⟩

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Journal Article: Testing for the Imports-Led Growth and the Growth-Led Imports Hypotheses in Panels for the Small Island World (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04301773

DOI: 10.3917/redp.334.0569

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