Economic Growth in Latin American Countries: Is It Based on Export-Led or Import-Led Growth?

Abstract

Using a data cointegration panel with error correction, we analyze the principal theories of international trade and economic growth—export-led growth (ELG), growth-led exports (GLE), and import-led growth (ILG)—for Latin American countries. The results demonstrate that exports drive growth of gross domestic product (GDP). Although the effects of imports on growth are generally negative, in our disaggregated analysis by country, we find results for eight countries support the ELG theory, results for five countries support the ILG theory, results for one country support both theories and results for one country support neither theory. An interesting finding is the negative correlation between the impacts of exports and the impacts of imports on GDP growth, which implies that, in theory, ELG and ILG cannot exist simultaneously in a country.

Keywords:

• export-led growth
• import-led growth
• Latin America
• panel cointegration