Export-led growth hypothesis: Empirical evidence from the Southern African Customs Union countries

Abstract

Objective: The objective of the article is to examine the export-led growth hypothesis in the Southern African Customs Union (SACU).

Research Design & Methods: This study employs annual data on output, exports, imports, and a structural dummy variable for SACU countries, namely, South Africa, Botswana, Lesotho, Namibia, and eSwatini. The study applies the cointegration test based on the Johansen (1988) and the Johansen and Juselius (1990) approach, followed by the vector error correction model and the trivariate Granger causality analysis.

Findings: All SACU countries, apart from Lesotho, have witnessed a significant positive relationship between exports and economic growth during the reviewed period. In the case of Lesotho, the study finds a negative relationship between exports and economic growth. Causality results confirm that the export-led growth hypothesis is valid in Namibia and South Africa, but not in eSwatini, Botswana, and Lesotho.

Implications & Recommendations: Based on the overall findings, this study mainly recommends that policymakers in SACU countries should consider providing extensive support for the development of infrastructure and trade-related logistics.

Contribution & Value Added: SACU countries rely on a narrow range of exports, which could affect their vulnerability to external shocks. This article provides empirical evidence on whether data from SACU countries is consistent with the export-led growth hypothesis.