Trade and GDP Growth: Causal Relations in the United States and Canada

Autor: George K. Zestos, Xiangnan Tao
Rok vydání: 2002
Předmět:
Zdroj: Southern Economic Journal. 68:859-874
ISSN: 2325-8012
0038-4038
Popis: Causal relations between the growth rates of exports, imports, and the GDP of Canada and the United States are studied using the vector error correction (VEC) model. Utilizing time-series annual data (1948-1996), Granger causality tests are performed within the framework of the VEC model. Bidirectional causality is supported for Canada from the foreign sector to GDP and vice versa. A weaker relationship between the foreign sector and GDP is statistically supported for the United States. These results are also supported by comparing the total trade (exports plus imports) shares to GDP of the two neighboring economies. The Granger causality tests suggest that Canada is a more open economy than the United States and more trade dependent. Economic policies leading to economic growth and development have been studied by many economists for a long time. The literature in this area is rich; a number of candidate variables that may be related to economic growth have been considered and carefully examined. Some of these variables are investment, saving, inflation, inflation variability, governmental expenditures as a percentage of GDP, government deficit, and other mainly macroeconomic variables. Many economic models were constructed for the purpose of understanding economic growth and to shed light on this issue.' A group of economists has focused exclusively on the foreign sector, particularly on the relationship of exports, imports, and GDP growth. Emphasis on international trade dates back to the mercantilists more than two centuries ago. Mercantilists were firm believers that trade surpluses were the only favorable outcome for the domestic economy from international trade relations. Mercantilists supported export promotion and pro
Databáze: OpenAIRE
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