Export-led growth hypothesis (ELGH) claims that there is a positive relationship\nbetween exports and long-run economic growth. This research study\ntests the ELGH in the case of services exports analyzing annual time series data\nfrom 1984 to 2013 in Sri Lanka. The study employs Granger no-causality procedure\ndeveloped by Toda and Yamamoto in a vector auto regressive model\n(VAR) to identify the causality relationship between services exports and GDP.\nThe findings indicate that unidirectional causality is running from services exports\nto economic growth in Sri Lanka. Therefore, ELGH holds for services exports\nof Sri Lanka. The results are remained unchanged in the different lag\nstructures and order of integration. Hence, policies to encourage services exports\ncould be of an important driver of Sri Lankaâ??s long-run economic growth.
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