Time-series evidence for Balassa’s export-led growth hypothesis

Abstract

This paper investigates Balassa’s export-led growth hypothesis for Greece, Ireland, Mexico, Portugal and Turkey by constructing a vector autoregression (VAR) model. On the basis of the Granger non-causality procedure developed by Toda and Yamamoto (1995), the results show that export and output are causally related in the long run for Ireland, Mexico and Portugal. Our findings cannot offer support for the causality link between export and output for Greece and Turkey. Granger-causality is uni-directional, running from export growth to economic growth in Ireland and Mexico, and running from economic growth to export growth in Portugal.