CARIFORUM and UK EPA Study

Part 2 – Empirical Results

The relationship between trade, especially exports, and economic growth has an epic history; see Keesing,1967 and Krueger,1978. The theory is predictable because exports have been traditionally considered to be the engine of economic growth and development. Today, the concept of sustainable development is integrally related to debates about trade and plans for global development. Various scholars, including Nurkse (1961) and Tahir et al. (2015) have highlighted the functional relationship between trade and economic growth. The outward orientation of exports is widely measured by a function of the trade flow of exports for the export-led growth (ELG) studies. Analogously, the neo-classical export led growth (ELG) maintains that exports promote economies of scale, labor productivity, progress through technological improvements, production of quality goods and services, reduction of current account pressures, reduction of unemployment and other production factors, and reduction of economic inefficiencies (Fatemah and Qayyum, (2018)). The contributions of Helpman and Krugman (1985), and Kruger (1985) have also been noteworthy. Dutt and Ghosh (1996) and Xu (1996) found supportive results for trade and economic activity among 17 out of 32 economies. Their analyses cut across different data sets like time series, cross sectional and panel data. Fatemah and Qayyum, note that although the trade and growth nexus has been emphasized in many models, Dutt et al. highlight that one of the major variables that enter the growth function is trade. Similarly, exports have prominently figured as the main engine of growth in Southeast Asia. Following, Balassa (1978), Feder (1983), and Fosu (1990), Fatemah and Qayyum (2018), Fatemah and Qayyum, (2018) estimated an elasticity model of real GDP, which responded to a function of aggregate exports and other covariates:

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