Is the export-led growth hypothesis valid for Australia?
The relationship between exports and output is examined using Australian annual data over the period 1900-1993. Cointegration and causality testing fails to detect the existence of a long-run or short-run relationship between the two variables. These results are explained by restoring to the structural time series modelling approach which shows that while the output series exhibits cyclical variation, the exports series does not have this property. It is concluded that the export-led growth hypothesis is not valid for Australia.