Authors : 1Ajit Kr. Ray and 2Md. Nesarul Karim
Abstract: Bangladesh, like other South Asian countries, had actively pursued import-substitution strategies (ISS) upto the early eighties. Although many have shown that the effectiveness of such strategy is not unconditional for under-developed countries, the policy of ISS has been replaced by the strategy of export-led growth (Begum et al., 1998) in Bangladesh. There are two aspects of the problem – economic growth can help expansion of export and, on the other hand, export can promote economic growth by increasing aggregate demand. This two-way causation has been studied in the literature of development economics from various approaches (Michaely, 1977; Balassa, 1978; Tyler, 1981; Kavoussi, 1984 and Chow, 1987). Different methodologies have been developed in the literature to test causality in a bivariate model. (Sims, 1972 and Granger, 1969). Many economists have verified these models empirically mainly for the countries where manufacturing industries occupy an important position in the economy. We have verified, following Sims for testing two-way causation, economic data of Bangladesh where manufacturing industries are yet to take dominant position and thus , with data-set extending up to 1999, have tried to reconcile the contradictory conclusion arrived by two independent studies by (Begum et al., 1998 and Nath, 1997).
1Ajit Kr. Ray and 2Md. Nesarul Karim , 2005. Test of Two-Way Causation Between Export and Economic Growth: An Empirical Evidence of Bangladesh Economy . Pakistan Journal of Social Sciences, 3: 157-165.