Testing export-led growth in Tunisia and Morocco: New evidence using the Toda and Yamamoto procedure

This paper examines the export-led growth hypothesis in Tunisia and Morocco using a multivariate time-series framework. The two selected countries present an interesting case study in terms of their growing outward orientation and adoption of export promotion policies as part of their growth priorities. Since the eighties, both countries have integrated themselves into the world economy and have continuously improved their growth prospects. As a result, they have experienced an outstanding economic performance during the past decade. Despite the multiple similarities between Morocco and Tunisia; our empirical model based on the Toda and Yamamoto (1995) procedure reveals two conflicting results. Firstly, there is evidence for export-led growth in Tunisia while the results for Morocco reveal an import-led growth policy oriented. Secondly, results show no evidence of bidirectional causality between imports and exports for both countries. Therefore, new structural reforms are needed for the two countries to benefit from their high trade openness and from their trade partners.