Manufactured exports and economic growth

The dramatic growth performances of the newly industrializing countries (NICs) have led many economists to call them "economic miracles", and have drawn considerable attention to the hypothesis of export-led growth (ELG). In this dissertation we analyze the contribution of the export sector to the growth of income of seven high performing economies from Asia and Latin America (Brazil, Hong Kong, Indonesia, Malaysia, Mexico, Republic of Korea and Taiwan).Effects of the expansion of manufactured exports from the developing countries have been empirically investigated by its impact on the growth of national income by a number of economists, but most of these studies suffer from serious shortcomings (Edwards (1993)).In the theoretical part of the dissertation we generalize the ideas proposed in the literature in support of the ELG hypothesis and show the channels through which export affects output growth. The model shows that, under certain conditions, an economy can experience positive growth in per capita income even in the long-run.We use the theoretical model as the basis for the empirical analysis using time-series data from the seven countries. Since our model shows the interdependence of the aggregate variables and preliminary statistical analysis indicates the non-stationary character of the variables involved, Johansen's method of cointegration is used in the empirical part. Johansen's method allows us to test the number of cointegrating vector(s) in the model and test hypotheses about the space generated by the cointegrating vector(s). It also uses information from the equation of each of the variables in order to obtain maximum likelihood coefficients. Most of the deficiencies of the previous empirical studies can be tackled by this method.Contrary to the popular belief, we find no evidence of ELG hypothesis for any of the seven countries. We do not find any support for the notion that expansion of the manufactured export sector positively affects capital accumulation.U of I OnlyETDs are only available to UIUC Users without author permissio