Exports and growth: is the export-led growth hypothesis valid for provincial economies?
This paper re-examines the export-led growth hypothesis using provincial data. Unlike other studies that concentrate on country-level data, this study investigates the validity of the hypothesis for four largest provinces in Korea: Seoul, Kyunggee, Kyungnam, and Pusan. The causal implication of the export-led growth hypothesis is generally supported for all provinces in the sample. The framework of analysis is two- and four-variable autoregressive models that include provincial exports, provincial output, terms of trade, and national output shocks. Granger causal orderings from exports to output growth are generally supported in bivariate causal models. In multivariate models, variance decompositions and impulse response functions further indicate that export growth has a significant impact on output growth for all provinces although a feedback effect from output to export growth appears in Seoul and the Kyungnam province.
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