Is there an export‐ or import‐led growth in emerging countries? A case of BRICS countries

• Author: Krishna Reddy Chittedi,Chandrashekar Raghutla
• Published date: 01 August 2020
• Date: 01 August 2020
• DOI: http://doi.org/10.1002/pa.2074

ACADEMIC PAPER

Is there an export- or import-led growth in emerging

countries? A case of BRICS countries

Chandrashekar Raghutla

1

| Krishna Reddy Chittedi

2

1

Department of Economics, School of

Humanities and Social Sciences, GITAM

University, Hyderabad, Telangana, India

2

School of Economics, University of

Hyderabad, Hyderabad, Telangana, India

Correspondence

Krishna Reddy Chittedi, Assistant Professor,

School of Economics, University of Hyderabad,

Telangana, India.

Email: krc@uohyd.ac.in

The BRICS economies could be considered a world number one trading group in one

respect and emerging economies in another. The study applied both Johansen

cointegration methodology for the long-run relationship and Granger causality test

for the direction of causality for the period of 1979–2018. The study findings con-

firmed that the growth-led exports (GLE) hypothesis model is relevant for India,

South Africa, and China, while exports-led growth (ELG) hypothesis model is relevant

for both Brazil and Russia. The growth-led imports (GLI) hypothesis model is relevant

for Brazil, India, China, and South Africa, while import-led growth (ILG) hypothesis

model is relevant for Russia. Hence, based on the findings, we confirmed that trade-

led growth hypothesis is valid. Finally, the results show that domestic and global

demand contributes to a larger trade; countries that are labor-abundant generate

employment and foster economic growth.

JEL CLASSIFICATION

C32; F14; F19; F43

1|INTRODUCTION

Since 2001, a rich debate on BRICS has been started at length by

scholars, as well as policymakers around the globe. How economies

can attain the growth is a widely debated topic in the arena of inter-

national trade. Among the main question that arises about a trade is

one related to the enhancement of economic growth. Economic

growth is largely dependent on the trade, output, and trade conserva-

tion policies oriented toward an increase in trade activities may have

a positive impact on country's growth. This research is aimed at inves-

tigating the BRICS empirical importance and its influence on the world

economy during the 21st century. Furthermore, this study not only

involves the main focus on trade measures regarding and economic

growth but also provides a basic discussion of trade liberalization poli-

cies. Economies have emerged as a common platform of contrasts and

a similar background for the trade in promoting economic develop-

ment. Economic reforms are supposed to boost the production and

output sector by enhancing the efficiency of productivity with natural

resources, and have the compulsion of utilization and availability of

skilled labor with an adoption of modern technology in addition to

promoting economic growth in the long run.

Prominent economists Helpman and Krugman (1985) postulate

that export growth leads to economic growth via specialization in pro-

duction, economies of scale, as well as distribution of technical knowl-

edge. In a study by Bhagwati (1988), the growth-led-exports (GLE)

hypothesis was suggested in support of the neoclassical trade theory

where the author said that economic growth is developing both eco-

nomic demand and supply sides. The existing literature, by pioneer

authors, provides mixed results on the studies that have explored the

exports-led growth (ELG). For example, one stream of researchers

argued for stronger linkage between ELG hypothesis among the coun-

tries matter for their international trade comovements, while another

stream of studies seeks to provide the superiority of ELG. The main

shortcomings of the previous empirical inquiries are that they focused

mostly on the ELG hypothesis.

International trade can lead the nation to embrace more quickly

contemporary technological change to enhance effective production

(Jung & Marshall, 1985). Trade allows a nation to access more modern

production techniques to enhance its production capacity. Interna-

tional trade, both exports and imports (imports also exported from

another country), are the most important variables that contribute to

the economic growth. The economies have achieved considerable

Received: 13 December 2019 Accepted: 24 December 2019

DOI: 10.1002/pa.2074

J Public Affairs. 2020;20:e2074. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons, Ltd 1of12

https://doi.org/10.1002/pa.2074