Export-led Growth in the Former CMEA Countries?: An Empirical Investigation for Eastern Europe

Abstract: This paper tries to investigate whether the export-led growth hypothesis is valid for the former European CMEA countries, Bulgaria, Czechoslovakia, the GDR, Hungary, Poland, Romania and the Soviet Union. For testing the validity of the export-led growth hypothesis the paper applies estimations based on "traditional" production functions as well as tests for Granger causality. The estimations in a production function-type framework seem to indicate that, except for Czechoslovakia, there is some evidence for the export-led growth hypothesis. In the context of a vector autoregression the Granger causality tests yield quite different results; the export-led growth hypothesis is rejected. It is interesting that the differing results of those two methods have some tradition in the literature. The ambiguity of the results is striking from the theoretical point of view: Following the conventional idea of trade within the rigid political framework of centrally planned economies, a clear rejection of the export-led growth hypothesis should be expected.