Empirical Evidence of Export-Led Growth Hypothesis for South Asia

Abstract

Trade is considered an engine of economic growth (EG). Export-led growth (ELG) hypothesis narrates exports are a critical factor influencing EG. This study aims to test the relationship between exports and EG in South Asian countries using panel data from 1990 to 2020. Additionally, the study investigates whether the GDP growth of the countries acts as a proxy for the countries' development stage to see whether there is a causal relationship between these two macroeconomic variables. The present study has used EG as a dependent variable and exports of South Asian countries as an independent variable, along with fuel import, capital, labor force, and exchange rate. The study applied panel ARDL techniques to test the relationship between export and EG. According to empirical findings, for all South Asian countries, exports have a considerable positive impact on EG, whereas fuel imports have a significant and negative effect.