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Direct and Indirect Causality Between Exports and Economic Output for Bangladesh and Sri Lanka: Horizon Matters

Judith Clarke () and Mukesh Ralhan ()

No 512, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: The extensive body of research that examines for (Granger, 1969) causality from exports to output for developing countries, including Bangladesh and Sri Lanka, using vector autoregressions and/or vector error correction models, is limited in only examining for one-period ahead or direct causality; the exception is in bivariate systems. This (usually unrecognized) focus on one-period causality in multivariate systems has often led to conclusions that exports do not Granger-cause economic output. We show that moving to Granger-causality at longer horizons, in a commonly used multivariate system, leads to bidirectional causality between exports and output, even when there is not one-period causality; the longer horizon causality arises indirectly through one or more of the auxiliary variables.

Keywords: Economic growth; Granger causality; export-led growth; vector autoregressions (search for similar items in EconPapers)
JEL-codes: C32 O4 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2005-07-15
New Economics Papers: this item is included in nep-dev and nep-sea
Note: ISSN 1485-6441
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

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