Does Trade Drive Global Growth?


wiiw Research Report No. 386,
19 pages including 4 Tables and 6 Figures

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Conventional econometric analysis using VEC suggests that there is a long-term relationship between nominal world GDP and nominal world exports. The analysis cannot say anything about the causal relationships between the levels of GDP and exports. But it says a lot about the rules governing the short-term adjustments in GDP and exports. When considering such short-term adjustments, GDP plays the first fiddle. Short-term GDP changes have driven short-term changes in world exports, at least over the years 1987-2008. But the short-term changes in world exports did not ‘cause’ positive short-term changes in GDP.


Keywords: world income, world trade, growth, globalization, VEC, Granger causality

JEL classification: F43, F15, O41, O49

Countries covered: non specific

Research Areas: Macroeconomic Analysis and Policy, International Trade, Competitiveness and FDI