Advances in Economics and Business Vol. 3(2), pp. 62 - 69
DOI: 10.13189/aeb.2015.030205
Reprint (PDF) (316Kb)


An Analysis of Export Led Growth Hypothesis: Cointegration and Causality Evidence from Sri Lanka


Muhammad Tahir 1, Humayun Khan 2,*, Muhammad Israr 3, Abdul Qahar 4
1 Department of Economic, Preston University, Islamabad
2 Institute of Development Studies, The University of Agriculture-Peshawar, Khyber Pakhtunkhwa-Pakistan
3 Department of Rural Development, Amir Muhammad Khan Campus-Mardan, The University of Agriculture-Peshawar, Khyber Pakhtunkhwa-Pakistan
4 Amir Muhammad Khan Campus-Mardan, The University of Agriculture-Peshawar, Khyber Pakhtunkhwa-Pakistan

ABSTRACT

This study examines the export led growth (ELG) hypothesis for Sri Lanka on the basis of annual data for the period 1981 to 2012, drawn from the World Bank (WDI) data bank. The period is selected on the grounds that during the period the Sri Lankan economy has been liberalized and in a liberalized economy it is expected that the trade sector plays a key role in national income determination. The hypothesis is tested with simple GDP and GDP net of exports as proposed by Sharma and Panagiotidis (2005). Johansen cointegration (1988) test is used to check the long run association which rejected the hypothesis of any long run association between export and GDP and GDP net of exports. Same results are also revealed by Granger causality (1969) and existence of short run relationship between exports and GDP and GDP net of exports is also rejected by VAR. However, Granger cause between imports and investment is noticed which run from imports to investment and from investment to imports respectively at 5% and 10% level of significance. Unidirectional causality is also recorded, at 05% level of significance, between investment and unemployment which run from investment to unemployment. However, no empirical evidence in support of ELG hypothesis for Sri Lanka is found.

KEYWORDS
Export Led Growth, Cointegration and Causality, Sri Lanka

Cite this paper
Muhammad Tahir , Humayun Khan , Muhammad Israr , Abdul Qahar . "An Analysis of Export Led Growth Hypothesis: Cointegration and Causality Evidence from Sri Lanka." Advances in Economics and Business 3.2 (2015) 62 - 69. doi: 10.13189/aeb.2015.030205.