Export-Led or Import-Led Growth: Evidence from Algeria, Morocco and Tunisia

The purpose of this paper is to examine the relationship between export, import, exchange rate and economic growth for three developing countries Algeria, Morocco and Tunisia.

To investigate the causal relation between these variables, we apply Johansen Cointegration and Granger Causality test using the annual data set for the period of 1975–2012. GDP per capita is taken as dependent variable and exports, imports and exchange rate as independent variables.

We find long run association among economic growth, exports, imports and exchange rate. Granger causality results show that growth does Granger cause Exports in Tunisia. Real GDP per capita is granger causing imports in Morocco. In Algeria real GDP per capita does not granger cause neither export nor import. However, real GDP per capita is granger causing exchange rate and exchange rate granger causing imports. There is also bi-directional causality among export and import in Algeria.

Our finding suggests that for long run economic growth these countries should emphasis to domestic markets and domestic demand, along with competitive exchange rate, exports of goods and services and imports of essential raw materials.