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The aggregate exports-GDP relation under the prism of infrequent trend breaks and multi-horizon causality

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Abstract

This paper re-examines the relationship between exports and economic growth in OECD countries. We apply the multi-horizon causality method developed by Dufour et al. (J Econ 132(2):337–362, 2006) for the first time, taking into account the possibility of infrequent structural trend breaks. Econometric techniques that avoid the circular problem when testing for segmented trends and unit roots have been employed along with a hybrid estimator of break location. The empirical evidence indicates that there is a unidirectional causal relationship from exports to economic growth for Finland, Germany, and the United States in the short run horizon, and directly in the cases of Austria and Ireland. We verify a direct causal relation from economic growth to real exports in France, Luxembourg and Portugal in various continuous horizons. Bidirectional causal relations between exports and economic growth were detected in Greece and Norway.

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Notes

  1. The hypothesis that export causes economic growth is called the export-led growth hypothesis.

  2. Hill (2007) provides an alternative efficient testing methodology for multi-horizon causality in trivariate VAR systems.

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  1. Centre of Planning and Economic Research, 11 Amerikis Street, 106 72, Athens, Greece

    Ioanna Konstantakopoulou

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  1. Ioanna Konstantakopoulou
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Konstantakopoulou, I. The aggregate exports-GDP relation under the prism of infrequent trend breaks and multi-horizon causality. Int Econ Econ Policy 14, 661–689 (2017). https://doi.org/10.1007/s10368-016-0355-1

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