Research on the Relationship between Foreign Trade and the GDP Growth of East China—Empirical Analysis Based on Causality

Abstract

In open economy, development of foreign trade greatly impacts GDP growth. Adopt modern testing methods like unit root, timeseries cointegration analysis and error correction model for researching the causalities between foreign trade including total export and import with the collected 28year statistical data of east China from 1981 to 2008, including total export and total import and GDP growth of east China. The result suggests that there exist long term or short termcausality between GDP and total export and import as well as between GDP and export, foreign trade is the long term and short term reason of GDP growth, but no evidence can prove that there exists long term stationary causality between import trade and GDP. This paper finally provides with some instructive recommendations on how to develop the foreign trade of east China under the new global economy environment.