New evidence on the Export-led-growth hypothesis in the Southern Euro-zone countries (1960-2014)

This paper implements the bound-testing approach proposed by Pesaran, Shin, and Smith (2001) to investigate the static and dynamic relationship between exports and economic growth in the Southern Euro-zone countries. Moreover, the causal link between these variables is also tested by the Granger no-causality procedure that has been developed by Toda and Yamamoto (1995) using a three-variable vector autoregression (VAR) model. The data span for the study is from 1960 to 2014. The results suggest the existence of positive long-run equilibrium relations in Portugal, Spain, and Greece. Furthermore, the findings indicate that bidirectional Granger causality is predominant in Spain and Greece. Unidirectional causality from exports to economic growth is found for Portugal. No-causality relation is detected for Italy.