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
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
New Economics Papers: this item is included in nep-dev and nep-sea
Note: ISSN 1485-6441
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Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:0512
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