Causal nexus between export and economic growth in the European Union countries

Abstract

The relationship between export and economic growth is still a topic of discussion by researchers. Some studies have confirmed that export leads to economic growth, while others see economic growth leads to export. Many countries are still in a dilemma of whether to open up their economies to promote export or whether they should concentrate on economic activities, which will promote export. This paper has aimed to examine export – growth nexus in the European Union (EU) countries during the period of 1995 – 2015. Descriptive statistics analysis and econometric methods have been applied for this purpose. On the basis of correlation analysis, twenty-two countries have had significant relationships between export and economic growth. Granger causality test has been applied to detect the direction of causality. The research has found unidirectional causality running from export to GDP in Poland, Portugal, Slovakia and Sweden. In contrast, unidirectional effects from GDP to export have been detected in eleven the EU countries, such as Belgium, Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Netherlands, Romania and Slovenia. Moreover, the research also has noticed bidirectional causality in Denmark. That is, GDP causes export and vice versa. Finally, in six countries, such as Austria, France, Germany, Italy, Luxembourg and Malta Granger causality has not been found. It means that export does not cause economic growth and vice versa. The presence of a causal link between export and economic growth has implications of great importance on development strategies for the EU countries.