Exports and economic growth: evidence from cross–country analysis

Abstract

This paper analyses the relationship between exports growth and economic growth by estimating an augmented GDP–growth equation on the basis of cross–country data, and using OLS and random coefficient (RC) methods. The latter method yields both mean response coefficients, as in the case of OLS method, as well as country–specific coefficients. The relationship has been estimated for two separate periods, i.e. 1965–80 and 1980–90. The estimates obtained using a RC method indicates that while there exists a positive link between exports and economic growth, the relationship is significant only for the period 1980–90. This suggests that the results obtained in the earlier studies using OLS method could be spurious. The evidence further indicates that the change in the coefficients between the two periods consists of both structural as well as behavioural shifts. Finally, the estimated country–specific coefficients show that the role of exports in GDP growth vary with the level of development.