EXPORT-LED GROWTH HYPOTHESIS FOR AUSTRALIA - AN EMPIRICAL REINVESTIGATION

The export-led growth hypothesis is tested using quarterly time series data for Australia by constructing a vector autoregression (VAR) mode l. The Granger no-causality procedure developed by Toda and Yamamoto ( Journal of Econometrics, 66, 225-50, 1995) was applied to test the cau sality link between real export growth and real manufacturing output g rowth. Three distinct features in this paper stand out compared to ear lier studies on the case of Australia: first, we have gone beyond the traditional two-variable relationship by building a five-variable VAR model in the production function context to avoid the possible specifi cation bias; second, we follow Riezman, Whiteman and Summers (Empirica l Economics, 21, 77-110, 1996) to test the hypothesis while controllin g for the growth of imports to avoid producing a spurious causality re sult; and finally, the methodology by Toda and Yamamoto is expected to improve the standard F-statistics in the causality test process. Two principle results emerge from our research. First, no evidence was fou nd for the export-led growth hypothesis in Australia; second, when app lying a longer lag structure, we found evidence of a one-way Granger c ausality running from manufacturing growth to exports growth.