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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
Simultaneity Problem of Exports and Economic Growth: A Panel Data Analysis of the European Union
Author(s)
Seham H. Negem
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DOI:10.17265/1537-1514/2016.12.001
Affiliation(s)
Tanta University, Tanta, Egypt
ABSTRACT
This
paper focuses on the export-growth simultaneity problem. It attempts to investigate
whether exports result in and/or
from economic growth. To solve the simultaneity problem in the economic growth equation, the estimates
are obtained using the simultaneous equations model; considering the direct and
indirect effect through exports growth. A two-equation simultaneous equations model, SEM, of two endogenous variables, the real output, representing
the economic growth, and exports growth, is developed to deal with the endogeneity problem. The appropriate tests and the
estimation of the regression results are obtained using Give Win, Pc-Give. The regression analysis using panel
data starts by testing for unit root for each variable included. Then the mentioned
model is estimated using panel data for 28 countries as full sample and for the
richest group, seven countries, of the EU. The panel
data cover the period 2000-2014. For full sample and the richest group, the three-stage
least squares (3SLS) technique is used to estimate the regression. The findings
of this paper indicate that the effect of exports growth on economic growth does
not seem to differ in the two groups. The positive feedback, bi-directional, relationship
between exports growth and economic growth exists; supporting both Exports Led Growth
(ELG) and Growth Led Exports (GEL) arguments in the EU economies. This finding is
in line with the theoretical argument of the ability of the economic unions to benefit
from the international trade. Export duties, for both full sample and the richest
group, are indirectly negatively associated with economic growth. So do the tariffs
of the trading partners. However, the terms of trade, indirectly and positively affected the economic
growth via their direct influence on exports growth.
KEYWORDS
SEM, ELG, GLE, EU, endogeneity problem, order and rank conditions
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