Is There an Export- or Import-led Growth in BRICS Countries? An Empirical Investigation

Abstract

At present, BRICS encompass 40 percent of the world’s population and account for nearly 30 percent of total global GDP in terms of purchasing power parity (PPP). This is the reason that the balance of global economic power is now shifting from United States and Europe to a number of fast growing and large developing countries like BRICS. The purpose of this article is to examine the relationship between export, import and economic growth in BRICS (especially Brazil, India and South Africa) using panel data from 1967 to 2014. The article applied the Pedroni’s panel co-integration test, fully modified ordinary least square (FMOLS), dynamic ordinary least square, and vector error correction model. The results of Pedroni’s co-integration test indicate that there exists long-run relationship between export, import, gross capital formation, and economic growth. In addition, bidirectional causality was found between export and economic growth, validating the export-led growth (ELG) and growth-led export (GLE) hypothesis. Moreover, the results of FMOLS imply that 1 percent increase in export will lead to a 0.44 percent increase in GDP per capita in the long-run. The study suggests that studied nations of BRICS should focus on export promotion strategy to reduce current account deficit.