Export Led Growth Hypothesis: Evidence from Kenya

Grace Muhoro; Manaseh Otieno

doi:doi:10.11648/j.jwer.20140304.11

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Export Led Growth Hypothesis: Evidence from Kenya

Grace Muhoro, Manaseh Otieno

Published in Journal of World Economic Research (Volume 3, Issue 4)

Received: 11 August 2014 Accepted: 27 August 2014 Published: 10 September 2014

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Abstract

The Export-Led Growth Hypothesis (ELGH) postulates that export growth is one of the key determinants of economic growth. This paper aims to investigate the Export-Led Growth Hypothesis in Kenya using annual time series data from 1976 to 2011 and dynamic time series techniques of Auto Regressive Distributed Lag and 2-Stage Least Squares. The 2-Stage Least Squares is used to correct for the endogeneity problem of the variables involved. A seven-variable Vector Auto Regression (VAR) model (GDP, Exports, Imports, Household Consumption, Government Consumption, Gross Fixed Capital Formation and Foreign Direct Investment) is developed from a national income identity that links output to its contributing factors. The results indicate that there is unidirectional causality running from exports to economic growth. This implies that export-led growth hypothesis can be supported in the Kenyan economy in the short run. Besides, our results suggest that the growth rate of household consumption and Gross Fixed Capital Formation have positive and statistically significant impacts on economic growth. Hence, in the case of Kenya, export enhancing policies that will improve the quantity, quality and value of exports in the overall GDP contribution of exports are recommended in promoting and sustaining economic growth.

Published in	Journal of World Economic Research (Volume 3, Issue 4)
DOI	10.11648/j.jwer.20140304.11
Page(s)	37-46
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2014. Published by Science Publishing Group

Keywords

Economic Growth, Export-Led Growth Hypothesis, Causality

References

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[4]	Bernard, A. B., and J. B. Jensen (1995),” Exports, Jobs, Wages in U.S. Manufacturing, 1976-1987”, Brookings Papers on Economic Activity, Microeconomics, Washington DC
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[6]	Bigsten, A. and M. Söderbom (2010), “African Firms in the Global Economy”, Department of Economics & Gothenburg Centre of Globalization and Development, University of Gothenburg
[7]	Dutt, S. D., and D. Ghosh, (1994), “An Empirical investigation of the Export Growth-Economic Growth relationship”, Applied Economics Letters 1: 44-48.
[8]	Fajana, O. (1979), “Trade and Growth: The Nigerian Experience”, World Development Journal, 7, pp. 73-78.
[9]	Fosu, A.K. (1990), “Exports and Economic Growth: The African Case”, World Development, Vol. 18, No. 6 pp. 831-35.
[10]	Johansen, S., and K. Juselius (1990), “Maximum Likelihood Estimation and Inference on Cointegration with Applications to The Demand for Money”, Oxford Bulletin of Economics and Statistics 52: 169-211.
[11]	Jordaan, A. C., and Eita, J. H. (2007), “Export and Economic Growth in Namibia: A Granger Causality Analysis”, South African Journal of Economics, Vol. 75:3.
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[13]	Keong, C.C., Yusop, Z., and Sen, V.L.K (2005), “Export-Led Growth Hypothesis in Malaysia: An Application of Two-Stage Least Square Technique”, Sunways Academic Journal, 2, 13-22
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[15]	Mohan, R., and Nandwa, B. (2007), “Testing Export-led Growth Hypothesis in Kenya: An ARDL Bounds Test Approach”, Bryant University, pp. 1-18.
[16]	Musonda, I. (2007), “Is Economic growth led by Exports in Zambia?” Ministry of Finance and National Planning –Planning and Economic Management Lusaka, Zambia, pp.1-22
[17]	Palumbo, A. (2003), “Supply and demand in Kaldor’s model of growth”, www.aracne-editrice.it
[18]	Ram, R. (1987), “Exports and Economic Growth in Developing Countries: Evidence from Time Series and Cross-Sectional Data”, Journal of Economic Development and Change, 36, pp. 51-72.
[19]	Republic of Kenya, Economic Surveys, Various Editions
[20]	Riezman, R. G., Summers, P.M., and Whiteman, C. H. (1995), “The Engine of Growth or Its Handmaiden? A Time-Series Assessment of Export-Led Growth”, Empirical Economics, 21, 77-110
[21]	Shirazi, N. S., and Manap, T.A.A. (2004), “Exports and Economic Growth Nexus: The Case of Pakistan”, Pakistan Development Review, 43: 4 Part II (Winter 2004) pp. 563–581
[22]	Smith, E.J.M. (2001), “Is Export Led Growth Hypothesis Valid for Developing Countries? A Case Study of Costa Rica”, UNCTAD: Policy Issues in International Trade and Commodities Study Series No.7;UNCTAD/ITCD/TAB/8; United Nations Publications, Geneva.
[23]	Ukpolo, V. (1994): “Export Composition and Growth of Selected Low-Income African Countries: Evidence from Time-Series Data,” Applied Economics 26, 445-449.
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Grace Muhoro, Manaseh Otieno. (2014). Export Led Growth Hypothesis: Evidence from Kenya. Journal of World Economic Research, 3(4), 37-46. https://doi.org/10.11648/j.jwer.20140304.11

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ACS Style

Grace Muhoro; Manaseh Otieno. Export Led Growth Hypothesis: Evidence from Kenya. J. World Econ. Res. 2014, 3(4), 37-46. doi: 10.11648/j.jwer.20140304.11

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AMA Style

Grace Muhoro, Manaseh Otieno. Export Led Growth Hypothesis: Evidence from Kenya. J World Econ Res. 2014;3(4):37-46. doi: 10.11648/j.jwer.20140304.11

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@article{10.11648/j.jwer.20140304.11,
  author = {Grace Muhoro and Manaseh Otieno},
  title = {Export Led Growth Hypothesis: Evidence from Kenya},
  journal = {Journal of World Economic Research},
  volume = {3},
  number = {4},
  pages = {37-46},
  doi = {10.11648/j.jwer.20140304.11},
  url = {https://doi.org/10.11648/j.jwer.20140304.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20140304.11},
  abstract = {The Export-Led Growth Hypothesis (ELGH) postulates that export growth is one of the key determinants of economic growth. This paper aims to investigate the Export-Led Growth Hypothesis in Kenya using annual time series data from 1976 to 2011 and dynamic time series techniques of Auto Regressive Distributed Lag and 2-Stage Least Squares. The 2-Stage Least Squares is used to correct for the endogeneity problem of the variables involved. A seven-variable Vector Auto Regression (VAR) model (GDP, Exports, Imports, Household Consumption, Government Consumption, Gross Fixed Capital Formation and Foreign Direct Investment) is developed from a national income identity that links output to its contributing factors. The results indicate that there is unidirectional causality running from exports to economic growth. This implies that export-led growth hypothesis can be supported in the Kenyan economy in the short run. Besides, our results suggest that the growth rate of household consumption and Gross Fixed Capital Formation have positive and statistically significant impacts on economic growth. Hence, in the case of Kenya, export enhancing policies that will improve the quantity, quality and value of exports in the overall GDP contribution of exports are recommended in promoting and sustaining economic growth.},
 year = {2014}
}

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TY  - JOUR
T1  - Export Led Growth Hypothesis: Evidence from Kenya
AU  - Grace Muhoro
AU  - Manaseh Otieno
Y1  - 2014/09/10
PY  - 2014
N1  - https://doi.org/10.11648/j.jwer.20140304.11
DO  - 10.11648/j.jwer.20140304.11
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 37
EP  - 46
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20140304.11
AB  - The Export-Led Growth Hypothesis (ELGH) postulates that export growth is one of the key determinants of economic growth. This paper aims to investigate the Export-Led Growth Hypothesis in Kenya using annual time series data from 1976 to 2011 and dynamic time series techniques of Auto Regressive Distributed Lag and 2-Stage Least Squares. The 2-Stage Least Squares is used to correct for the endogeneity problem of the variables involved. A seven-variable Vector Auto Regression (VAR) model (GDP, Exports, Imports, Household Consumption, Government Consumption, Gross Fixed Capital Formation and Foreign Direct Investment) is developed from a national income identity that links output to its contributing factors. The results indicate that there is unidirectional causality running from exports to economic growth. This implies that export-led growth hypothesis can be supported in the Kenyan economy in the short run. Besides, our results suggest that the growth rate of household consumption and Gross Fixed Capital Formation have positive and statistically significant impacts on economic growth. Hence, in the case of Kenya, export enhancing policies that will improve the quantity, quality and value of exports in the overall GDP contribution of exports are recommended in promoting and sustaining economic growth.
VL  - 3
IS  - 4
ER  -

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Author Information

Grace Muhoro

Kenya Institute for Public Policy Research and Analysis, Young Professional: Private Sector Development Division, Nairobi, Kenya
Manaseh Otieno

Kenya Institute for Public Policy Research and Analysis, Policy Analyst: Trade and Foreign Policy Division, Nairobi, Kenya

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Plain Text BibTeX RIS

APA Style

Grace Muhoro, Manaseh Otieno. (2014). Export Led Growth Hypothesis: Evidence from Kenya. Journal of World Economic Research, 3(4), 37-46. https://doi.org/10.11648/j.jwer.20140304.11

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ACS Style

Grace Muhoro; Manaseh Otieno. Export Led Growth Hypothesis: Evidence from Kenya. J. World Econ. Res. 2014, 3(4), 37-46. doi: 10.11648/j.jwer.20140304.11

Copy | Download

AMA Style

Grace Muhoro, Manaseh Otieno. Export Led Growth Hypothesis: Evidence from Kenya. J World Econ Res. 2014;3(4):37-46. doi: 10.11648/j.jwer.20140304.11

Copy | Download

@article{10.11648/j.jwer.20140304.11,
  author = {Grace Muhoro and Manaseh Otieno},
  title = {Export Led Growth Hypothesis: Evidence from Kenya},
  journal = {Journal of World Economic Research},
  volume = {3},
  number = {4},
  pages = {37-46},
  doi = {10.11648/j.jwer.20140304.11},
  url = {https://doi.org/10.11648/j.jwer.20140304.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20140304.11},
  abstract = {The Export-Led Growth Hypothesis (ELGH) postulates that export growth is one of the key determinants of economic growth. This paper aims to investigate the Export-Led Growth Hypothesis in Kenya using annual time series data from 1976 to 2011 and dynamic time series techniques of Auto Regressive Distributed Lag and 2-Stage Least Squares. The 2-Stage Least Squares is used to correct for the endogeneity problem of the variables involved. A seven-variable Vector Auto Regression (VAR) model (GDP, Exports, Imports, Household Consumption, Government Consumption, Gross Fixed Capital Formation and Foreign Direct Investment) is developed from a national income identity that links output to its contributing factors. The results indicate that there is unidirectional causality running from exports to economic growth. This implies that export-led growth hypothesis can be supported in the Kenyan economy in the short run. Besides, our results suggest that the growth rate of household consumption and Gross Fixed Capital Formation have positive and statistically significant impacts on economic growth. Hence, in the case of Kenya, export enhancing policies that will improve the quantity, quality and value of exports in the overall GDP contribution of exports are recommended in promoting and sustaining economic growth.},
 year = {2014}
}

Copy | Download

TY  - JOUR
T1  - Export Led Growth Hypothesis: Evidence from Kenya
AU  - Grace Muhoro
AU  - Manaseh Otieno
Y1  - 2014/09/10
PY  - 2014
N1  - https://doi.org/10.11648/j.jwer.20140304.11
DO  - 10.11648/j.jwer.20140304.11
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 37
EP  - 46
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20140304.11
AB  - The Export-Led Growth Hypothesis (ELGH) postulates that export growth is one of the key determinants of economic growth. This paper aims to investigate the Export-Led Growth Hypothesis in Kenya using annual time series data from 1976 to 2011 and dynamic time series techniques of Auto Regressive Distributed Lag and 2-Stage Least Squares. The 2-Stage Least Squares is used to correct for the endogeneity problem of the variables involved. A seven-variable Vector Auto Regression (VAR) model (GDP, Exports, Imports, Household Consumption, Government Consumption, Gross Fixed Capital Formation and Foreign Direct Investment) is developed from a national income identity that links output to its contributing factors. The results indicate that there is unidirectional causality running from exports to economic growth. This implies that export-led growth hypothesis can be supported in the Kenyan economy in the short run. Besides, our results suggest that the growth rate of household consumption and Gross Fixed Capital Formation have positive and statistically significant impacts on economic growth. Hence, in the case of Kenya, export enhancing policies that will improve the quantity, quality and value of exports in the overall GDP contribution of exports are recommended in promoting and sustaining economic growth.
VL  - 3
IS  - 4
ER  -

Copy | Download