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Theoretical and Applied Economics
No. 3 / 2015 (604), Autumn

Revisit Export and GDP Nexus in China and Taiwan: A Rolling Window Granger Causality Test

Ming-Hsien YANG
Feng Chia University, Taichung, Taiwan
Chih-She WU
Feng Chia University, Taichung, Taiwan

Abstract. This paper re-examines the causal link between export and economic growth for both, China and Taiwan, using a rolling window Granger causality test over the 1980Q1- 2013Q3 period. Our empirical results based on full-sample Granger causality test find evidence of feedback between export and economic growth for both China and Taiwan. However, results from our parameter stability test indicate that there is instability in our VAR model. We doubt these results might be misleading due to instability in our VAR model and these motivate us to use the bootstrap rolling window estimation to investigate the export and economic growth nexus which accounts for the time varying causal link between these two variables. Our empirical results from rolling window Granger causality test indicate that export growth did Granger cause economic growth in some certain periods, 1984Q4-1985Q2 and 1989Q2-1990Q1 for China and no relationship for Taiwan. On the contrary, economic growth also Granger cause export growth in some periods, 1987Q4- 1988Q1, 1989Q1-1989Q2, 2009Q3, and 2013Q2-2013Q3 for China and 1984Q4-1985Q1, 1989Q4, and 2008Q3 for Taiwan. Our empirical results have important policy implications for both China and Taiwan.

Keywords: Export Growth; Export Growth; Rolling Window Granger Causality Test; China; Taiwan.

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