Is the Export-led Growth Hypothesis Valid for India? Another Look at the Evidence

Md Sahnewaz Sanu

MPRA Paper from University Library of Munich, Germany

Abstract: The previous studies on the export-led growth hypothesis in India have yielded mixed and inconclusive results. This study explores the dynamic relationship between real exports and real economic growth for India in a multivariate framework by including ‘terms of trade’ as an additional variable for the period 1980-2017. Unlike most of the previous studies, this study employs the ARDL bounds testing approach and Toda-Yamamoto version of modified Granger causality test to examine this linkage. The results of the bound tests indicate that there is a stable long-run relationship between the variables when economic growth proxied by GDP growth is the dependent variable. Further, the results of the modified Granger causality test suggest that there is unidirectional causal flow from exports to economic growth and from terms of trade to economic growth without any feedback. The study, therefore, provides further evidence that growth in exports stimulate economic growth in India while there is no evidence of growth-driven export.

Keywords: Export-led growth; terms of trade; ARDL bounds test, Toda-Yamamoto; causality; GDP; India (search for similar items in EconPapers)
JEL-codes: C32 C51 F13 F14 F43 F63 O19 (search for similar items in EconPapers)
Date: 2019-07-03, Revised 2019-09-12
New Economics Papers: this item is included in nep-gro and nep-int
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Published in Indian Journal of Economics and Development 3.15(2019): pp. 331-340

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