A causal analysis between exports, imports and GDP per capita in the southern African customs union countries

Abstract

This study investigates the direction of causality between exports, imports and GDP per capita in the SACU countries: Botswana, Lesotho, Namibia, South Africa and Eswatini (Swaziland). The TodaYamamoto augmented Granger no-causality approach is applied. The study finds mixed causality results between exports, imports, and GDP per capita for the different countries. The export-led growth hypothesis is supported for Botswana and Eswatini, while import-led growth hypothesis is only confirmed in Namibia. Results suggest that a bi-directional Granger causality between exports and growth for Botswana and bi-directional Granger causality between imports and growth for Lesotho and South Africa exist. There is therefore no clear time-precedence. Finally, there is evidence of growth-led export hypothesis for Botswana, Lesotho, and South Africa. These mixed findings indicate that SACU countries should not solely dedicate their available resources to pursuing trade openness in promoting economic development but also address domestic economic reform strategies.