Revisited Export-Led Growth Hypothesis

Over the years, there has been extensive research on the relationship between a country’s export and economic growth with ambiguous and mixed results. The mixed results are due to bi-variate approach used in the analysis and periodisation (combining both import substitution and export promotion periods).This article corrects these two problems and uses co-integration and error-correction models to analyze the causal relationship between export growth and economic growth in India for post-liberalization period (1992[Q1]–2007[Q4]). The results indicate that there exists a long-term relationship between output and exports, and it is unidirectional, running from exports to output growth. Hence, in the case of India, further liberalization of trade policies are recommended in promoting and sustaining economic growth.