An empirical test of the export-led model in the member countries of the andean community (Comunidad Andina de Naciones-CAN)

Abstract

This paper seeks to empirically test the applicability of the export-led model to the economies of the countries belonging to the Andean Community (Comunidad Andina de Naciones-CAN) by verifying the export-led growth (ELG) hypothesis, which indicates that gross domestic product (GDP) behavior is based on export (EXP) dynamics. This hypothesis was tested for Bolivia, Colombia, Ecuador, and Peru. The methodology used was the application of Johansen cointegration and Block Exogeneity Wald tests to identify Granger causality between variables of the natural logarithms of EXP and GDP. The results obtained show that the causal effect of exports on GDP can only be rejected for the Bolivian economy. Lastly, the main conclusion of this study is that the economic policies of the CAN member countries should not assume that the export sectors are the foundations of their respective economies. Therefore, the CAN governments should not introduce economic policies that prioritize the expansion of the export sector.