EXPORT-LED GROWTH OR GROWTH-DRIVEN EXPORTS - THE CANADIAN CASE

In this paper we investigate the export-led growth hypothesis for Cana da by constructing a vector autoregression (VAR) in order to test for Granger (1969) causality between the following variables: real Canadia n exports, real Canadian GDP, and real Canadian terms of trade. Two pr incipal results emerge from our research. First, real Canadian exports , real Canadian terms of trade, and real Canadian GDP are co-integrate d. This implies that there exists a long-run steady state among these three variables. Second, we find evidence that a one-way Granger causa l relationship exists in Canada whereby changes in GDP precede changes in exports.