Exports and Imports-Led Growth: Evidence from a Small Developing Economy

• Activity Number: 389 - Novel Data Collection Strategies in Business and Economics
• Type: Contributed
• Date/Time: Wednesday, August 10, 2022 : 8:30 AM to 10:20 AM
• Sponsor: Business and Economic Statistics Section
• Author(s): Humnath Panta and Mitra Lal Devkota* and Dhruba Banjade
• Companies: Humboldt State University and University of North Georgia and Brenau University
• Keywords: Exports; Imports; Economic growth; Cointegration; VECM

Abstract

This paper examines equilibrium relationships and dynamic causality between economic growth, exports, and imports in Nepal using time-series data between 1965 and 2020, and documents empirical evidence in exports-led growth, imports-led growth, growth-led exports, and growth-led imports hypotheses in both the short and long run. The test results show no evidence favoring the exports-led growth and growth-led exports hypotheses in both the short and long run. However, the study finds evidence supporting the imports-led growth hypothesis in the short term and the growth-led imports hypothesis in the long term. Overall, this paper finds no evidence in favor of the notion that foreign trade supports the economic growth of Nepal in the long run. The paper contributes to trade and economic growth literature by investigating the relationship between exports, imports, capital, and gross domestic products in a small economy such as Nepal, where exports make a minimal and imports make an extensive contribution to gross domestic products.