The Export-Led Growth Hypothesis: A Panel Cointegration Approach in the Middle East and North Africa Countries (1980-2017)

Abstract

This study examines the hypothesis of the Export-Led Growth in the seven selected Middle East and North Africa countries, the hypothesis state that export growth driven by export promotion policies enhances overall economic growth. Empirical investigations have tended to focus attention on the direction of causality between exports and economic growth using Granger causality tests. However, the empirical results based on these tests are, at best, mixed and often contradictory. The paper employs panel data analysis by utilizing the Pedroni panel cointegration, Pedroni Dynamic Ordinary Least Squares and Fully Modify Ordinary Least Squares, and Canning-Pedroni causality methods, a recent development in panel data econometrics, properties of integration and cointegration and consistency of parameters. The study considers the following three variables; Real Gross Domestic Product (GDP), Real exports (EXP) and Real import (IMP). Annual secondary data are obtained from the World Bank Development Indicator for seven MENA countries, Namely, Algeria, Egypt, Sudan, Jordan, Saudi Arabia, UAE, and Qatar. The empirical results emphasize the existence of a positive relationship between Export and GDP. Results of waled and Z-bar Group statistics indicate the long-run unidirectional causality between Export and GDP, operates from Export to the GDP. It confirms the validity of Export-led growth hypothesis of the seven selected MENA countries. Empirical evidence suggests significant policy prescriptions; these countries should focus more on supporting export orientated industries through aid-for-trade, trade-capacity building schemes and other types of policies in order to promote economic growth.