Sage Journals: Discover world-class research

Abstract

The impact of the recent rise in India’s exports on its economic growth is tested using the Johansen cointegration technique. On using different measures of both trade and economic growth variables, a unidirectional causality has been found from trade to economic growth. It is concluded that in India the most important sources of causation from trade to economic growth have been externalities generated by the export sector and a relatively higher productivity of the export sector, while no evidence is found in favour of a positive impact of knowledge spillovers generated by trade on economic growth.

Keywords

R&D Spillovers Externalities Productivity Differential Causality Direction Johansen Cointegration JEL Classification: F43 JEL Classification: C32

Get full access to this article

View all access options for this article.

References

Dhawan, U. , & Biswal, B. (1999). Re-examining exportled growth hypothesis: A multivariate cointegration analysis for India. Applied Economics, 31(4): 525–30.

Dickey, D. , & Fuller, W.A. (1979). Distribution of the estimates for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(June): 427–31.

Dickey, D. , & Fuller, W.A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(July): 1057–72.

Doldado, J. , Jenkinson, T. , & Sosvilla-Rivero, S. (1990). Cointegration and unit roots. Journal of Economic Surveys, 4(3): 249–73.

Engle, R.F. , & Granger, C.W.J. (1987) Cointegration and error correction: Representation, estimation and testing, Econometrica, 55(2), March, 251–76.

Feder, G. (1983). On exports and economic growth. The Journal of Development Economics, 12(1–2), February–April, 59–73.

Granger, C.W.J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37(3), July, 424–50.

Grossman, G.M. , & Helpman, E. (1989). Product development and international trade. Journal of Political Economy, 97(December): 1261–83.

Grossman, G.M. , & Helpman, E. (1990). The new growth theory: Trade innovation and growth. American Economic Review, Papers and Proceedings, 80(2), May, 86–91.

10.

Grossman, G.M. , & Helpman, E. (1991a). Trade, knowledge spillovers and growth. European Economic Review, 35(2–3): 517–26.

11.

Grossman, G.M. , & Helpman, E. (1991b). Endogenous product cycles. Economic Journal, 101(408): 1214–29.

12.

Grossman, G.M. , & Helpman, E. (1991c). Quality ladders in the theory of growth. Review of Economic Studies, 58(1): 43–61.

13.

Islam, M.N. (1998). Export expansion and economic growth: Testing for cointegration and causality. Applied Economics, 30(3), 415–25.

14.

Johansen, S. (1988). Statistical analysis of cointegrating vectors. Journal of Economic Dynamics and Control, 12(2–3), June–September, 231–54.

15.

Nidugala, G.K. (1999–2000). Exports and economic growth in India: An empirical investigation, Indian Economic Journal, 47(3), 67–78.

16.

Perron, P. (1989). The great crash, the oil price shock, and the unitroot hypothesis. Econometrica, 57(6), November, 1361–401.

17.

Phillips, P. , & Perron, P. (1988). Testing for a unit-root in time series regression. Biometrica, 75(June): 335–46.

18.

Pissarides, C.A. (1997). Learning by trading and the returns to human capital in developing countries. The World Bank Economic Review, 11(1): 17–32.

19.

Rashid, A.I. (1995). Trade, growth and liberalisation: The Indian experience, 1977–89. Journal of Developing Areas, 29(April): 355–70.

20.

Riveria-Batiz, L.A. , & Romer, P.M. (1991a). Economic integration and endogenous growth. Quarterly Journal of Economics, 106(2): 531–55.

21.

Riveria-Batiz, L.A. , & Romer, P.M. (1991b). International trade with endogenous technological change. European Economic Review, 35(4), May, 971–1004.

22.

Romer, P.M. (1989). Increasing returns and long-run growth. Journal of Political Economy, 94(5): 1002–37.

23.

Sharma, S.C. , & Dhakal, D. (1994). Causal analysis between exports and economic growth in developing countries. Applied Economics, 26(12): 1145–57.

24.

Taylor, M.S. (1994). Once–off and continuing gains from trade. Review of Economic Studies, 61(3): 589–601.

25.

World Bank (2007) Unleashing India’s innovation—towards sustainable and inclusive growth. Washington, DC: World Bank.

What Causes Trade-led Growth in India?

Abstract

Keywords

Get full access to this article

References