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Export Performance and Economic Growth in East Asian Economies – Application of Cointegration and Vector Error Correction Model

Journal Name:

  • Eurasian Journal of Business and Economics

Publication Year:

  • 2016
DOI: 
https://doi.org/10.17015/ejbe.2016.018.08

Key Words:

Author NameUniversity of Author
Abstract (2. Language): 
East Asian Economies are considered to be most successful economies in the world. Following the footsteps of other East Asian economies such as Japan and South Korea, China also shifted towards export-led growth strategy in 80s. This study analyzes the effect of export performance on economic growth of three major East Asian economies i.e. Japan, South Korea, and China. This study has conducted the econometric analysis of macro data under multivariate framework for the period 1980-2012. In order to examine the causal relationship between exports and economic growth, the study has applied time series techniques such as Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests to check stationarity of variables, Johansen cointegration test for long run relationship, vector error correction model (VECM) for short run dynamics and for estimating speed of adjustment towards long run equilibrium. The analysis also made use of techniques Impulse Response Function (IRF) and Variance Decomposition Analysis (VDA) to investigate the interrelationships within the system. The estimated results suggested that all variables were cointegrated for East Asian economies. The study concluded that export-led growth (ELG) was only long run phenomenon in China and South Korea. The results for Japan supported growth led exports (GLE) particularly for short run.
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