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Export instability, income terms of trade instability and growth: causal analyses

Author

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  • Teame Ghirmay
  • Subhash Sharma
  • Richard Grabowski
Abstract
This paper seeks to examine the causal relationship between export instability. income terms of trade instability, investment and economic growth by using the cointegration analysis and the multivariate error correction model. In addition, reverse causality is also tested by examining whether output and investment cause export instability and income terms of trade instability. The data utilized are drawn from a sample of 14 developing nations. The cointegration results indicate that export and income terms of trade instability have long-run relationships with output. For most countries, instability in the income terms of trade is negatively related to output while the results for export instability are mixed. With respect to causality, it seems that export instability and income terms of trade instability play a causal role in the development process via a variety of avenues.

Suggested Citation

  • Teame Ghirmay & Subhash Sharma & Richard Grabowski, 1999. "Export instability, income terms of trade instability and growth: causal analyses," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(2), pages 209-229.
    • Handle: RePEc:taf:jitecd:v:8:y:1999:i:2:p:209-229
    DOI: 10.1080/09638199900000013
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    3. Nishat Fatima, 2010. "Analysing the Terms of Trade Effect for Pakistan," PIDE-Working Papers 2010:59, Pakistan Institute of Development Economics.
    4. Joël CARIOLLE, 2012. "Measuring macroeconomic volatility - Applications to export revenue data, 1970-2005," Working Papers I14, FERDI.
    5. Nishat Fatima, 2010. "Analysing the Terms of Trade Effect for Pakistan," Trade Working Papers 22828, East Asian Bureau of Economic Research.
    6. Joël CARIOLLE, 2012. "Mesurer l’instabilité macroéconomique - Applications aux données de recettes d’exportation, 1970-2005," Working Papers I14, FERDI.

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