This paper explores the dynamic relation between the exports and the gross domestic product from Romania. We employ the Johansen cointegration procedure and the Granger causality test to identify the interactions between the two variables. We find no cointegration but a unidirectional causality from exports to gross domestic product. We conclude the implementation of an export promotion strategy could be a solution for the Romanian national economy to surpass the actual severe recession.Export led-growth, Cointegration, Granger Causality

Dumitriu, Ramona

Nistor, Costel

Stefanescu, Razvan

English

Research Papers in Economics

EXPORTS AS AN ENGINE FOR  
THE ECONOMIC GROWTH:  
THE CASE OF ROMANIA 
 
Lecturer PhD Student Ramona Dumitriu,  
Lecturer PhD Razvan Stefanescu, 
Assoc. Prof. PhD Costel Nistor 
 
University “Dunarea de Jos”, Galati, Romania, 
rdumitriu@ugal.ro,  
rzvn_stefanescu@yahoo.com, 
costel_nistor_fse@yahoo.com 
 
Abstract 
 
This paper explores the dynamic relation between the exports and the gross domestic product from 
Romania. We employ the Johansen cointegration procedure and the Granger causality test to identify 
the interactions between the two variables. We find no cointegration but a unidirectional causality 
from exports to gross domestic product. We conclude the implementation of an export promotion 
strategy could be a solution for the Romanian national economy to surpass the actual severe recession. 
 
Keywords: Export led-growth, Cointegration, Granger Causality 
 
JEL Classification: F40, F41, F43 
 
1. INTRODUCTION 
 
Since  1970s  the  export  promotion  strategies  replaced,  in  many  countries,  the  import 
substituting industrialization strategies. In some of these countries, especially in those from 
South-East Asia, the adoption of the new strategy was followed by substantial increases of the 
gross domestic product, confirming the theories in which the exports are viewed as an engine 
for the economic growth.  
 
Using exports as a tool for the economic growth was promoted in the works of Adam Smith 
and  David  Ricardo  who  revealed  the  role  of  international  specialization.  Balassa  (1978) 
explained  the  impact  of  exports  on  the  economic  growth  by  some  effects  of  the  firms’ 
orientation towards the foreign markets such as the technology transfer or improving the skills 
of managers and workers.   
 
The hypothesis of export led growth (ELG) was tested in several empirical studies. Jung and 
Marshall (1985) studied the relation between the exports and the economic growth for 37 
developing countries. For most of them they found evidences supporting the ELG hypothesis. 
To similar results arrived Chow (1987) and Bahmani-Oskoee and Alse (1993). However, the 
results of other studies failed to validate the ELG hypothesis. Jie (2008) examined 71 cases of 
high GDP growth episodes accompanied by high export growth, concluding that in many 
cases the economic growth wasn’t caused by the exports. 
 
In this paper we analyze the dynamic relation between the exports and the gross domestic 
product from Romania. In the present, Romania is affected by a very severe recession and its 
balance  of  trade  experienced  substantial  deficits  in  the  last  two  decades.  In  these 
circumstances  the  stimulation  of  economic  growth  and  the  export  promotion  are  crucial objectives for the Romanian authorities. Some characteristics of the Romanian exports are 
important for understanding its interactions with the economic growth. In the last years many 
multinational companies, attracted by the cheap labor force, established branches in Romania. 
In comparison with the domestic firms they have some substantial advantages on the foreign 
markets such as the modern technologies or the relations with the foreign partners. In 2009, 76 
percent of Romanian exports were realized by foreign direct investment. In January 2007, 
Romania adhered to the European Union and its products gained unrestricted access to the 
European markets. Since then, the exports to the European countries increased substantially 
arriving, in 2009, at 71 percent from the total exports. For the relation between the exports and 
the gross domestic product analysis we use cointegration and the Granger Causality tests for 
quarterly data from 1999 to 2009. 
 
The rest of this paper is organized as follows. In the second part we approach the data and the 
methodology. In the third part we present the empirical results and in the fourth part we 
conclude. 
 
 
2. DATA AND METHODOLOGY 
 
In our analysis we employ quarterly values of the Romanian real gross domestic product and 
of the real exports of goods and services provided by the Romanian National Institute of 
Statistics. We use a sample of data from 1999 Q1 to 2009 Q4. All the values are seasonally 
adjusted by ARIMA X 12 method.  
 
We use the following variables: 
- rexp, as the natural logarithms of the real exports seasonally adjusted; 
- yrom, as the natural logarithms of the real gross domestic product seasonally adjusted; 
- d_rexp, as the first differences of rexp; 
- d_yrom, as the first differences of yrom. 
 
      We investigate the stationarity by two tests of unit roots: the Augmented Dickey – Fuller Test 
and the Saikkonen - Lutkepohl - Lanne Test, which allow taking into account the structural 
breaks. For both tests the number of lags will be chosen based on the Schwartz Bayesian 
Criterion.  We  employ  the  Johansen  Procedure  to  test  the  cointegration  relations  and  the 
Granger Causality Test to identify the causalities between the variables.  
 
 
3. EMPIRICAL RESULTS 
 
We perform the Augmented Dickey Fuller Tests for the four variables. Based on the graphical 
representation we chose as deterministic terms intercept and time trend for the level values 
and  only  intercept  for  the  first  differences  (Figure  1).  The  results,  presented  in  Table  1, 
indicate the variables are stationary only in their first differences. 
 
Table 1 - Results of Augmented Dickey Fuller Tests 
 
Asymptotic critical 
values 
Nr. 
crt. 
Variable  Deterministic 
terms 
Number of 
lags 
Value of test 
statistic 
1%  5%  10% 
1  rexp  intercept,   1  -1.8804  -3.96  -3.41  -3.13 time trend 
2  yrom  intercept,  
time trend 
1  -2.1191 
3  d_rexp  intercept 
 
1  -3.0810 
4  d_yrom  intercept 
 
1  -2.8636 
-3.43 
 
-2.86  -2.57 
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Figure 1 - Graphical representation of the level values and of the first differences  
for rexp and yrom 
 
The results of the Saikkonen - Lutkepohl - Lanne Test, presented in Table 2, confirm that rexp 
and yrom are not stationary in level values but stationary in their first differences. 
 
Table 2 - Results of the Saikkonen - Lutkepohl - Lanne Test 
 
Asymptotic critical 
values 
 
Nr. 
crt. 
Variable  Deterministic 
terms 
Number 
of lags 
Used 
break 
date 
Value 
of test 
statistic 
1%  5%  10% 
1  rexp  intercept,  
time trend 
1  2004 Q2  -2.1368 
2  yrom  intercept,  
time trend 
1  2006 Q2  -2.1923 
3  d_rexp  intercept 
 
1  2000 Q3  -3.8098 
-3.48  -2.88  -2.58 4  d_yrom  intercept 
 
1  2007 Q3  -3.0154       
 
We investigate the cointegration between rexp and yrom using the Johansen procedure. The 
results, presented in the Table 3, indicate no cointegration between the two variables. 
 
Table 3 - Results of the Johansen cointegration test 
 
Rank  Eigenvalue  Trace test  p-value  Lmax test  p-value 
0  0.52179  36.658  0.0000  31.722  0.0000 
1  0.10845  4.9360  0.0263  4.9360  0.0263 
 
We analyze the causalities between the two variables. The results of the Granger Causality 
tests, presented in the Table 4, reveal a unidirectional causality from rexp to yrom.  
 
Table 4 - Results of Granger Causality Tests 
 
Null hypothesis  F-statistic  P-value  Causal inference 
H0: "yrom" do not Granger-
cause "rexp" 
 
1.3003  0.2791  "yrom" do not Granger-
cause "rexp" 
 
H0: "rexp" do not Granger-cause 
"yrom" 
 
2.4143  0.0971  "rexp"  Granger-cause 
"yrom" 
 
 
4. CONCLUSIONS 
 
In this paper we approached the dynamic relation between the exports and the gross domestic 
product  from  Romania.  We  found  no  cointegration  between  them,  but  a  unidirectional 
causality from the exports to the gross domestic product. 
 
These  results  suggest  that  an  export  promotion  strategy  implemented  by  the  Romanian 
authorities could succeed in generating economic growth. This option could be an important 
part of the solution to surpass the severe recession which affects Romanian economy. 
 
The investigation on the ELG hypothesis could be extended to the relation between the main 
components of the exports and the gross domestic product. The interactions between imports 
and economic growth could be also taken into consideration. 
 
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Exports as an engine for the economic growth: the case of Romania

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