SERVICES EXPORT AND ECONOMIC GROWTH: A PANEL COINTEGRATION APPROACH

Chen Huan Shieh

Abstract


This paper attempts to quantify the contribution of services export to economic growth for 89 countries over the period 1970-2018. we estimate growth accounting equations to explore the causal relationship between services export and real GDP, using panel cointegration technique and panel error-correction models (VECM) in combination with fully modified OLS and dynamic OLS methods. Results show that long-run relationships exist and there is strong evidence of causality from services export to income and weak evidence of causality from income to services export. The results substantiate the existence of services export-led growth hypothesis. Further, the results show that in the long-run trade liberalization policies prove is beneficial in promoting productivity and growth.

Keywords: Services export, Economic growth, Panel cointegration, Causality.


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