INTERNATIONAL TRADE AND ECONOMIC GROWTH IN THE MIDDLE EAST COUNTRIES: A PANEL DATA ANALYSIS

Abstract

In this study, the relationships between export (EXP), import (IMP) and economic growth (GDP) in Middle East Countries were examined by using yearly data consist of 312 observations between 1993 – 2016. In the empirical analyses, Dumitrescu Hurlin Causality Test, Westerlund ECM Panel Co-integration and PGM Estimator were employed. The short-term analyses indicated; (a)  a bi-directional causality between GDP and IMP, (b)  a bi-directional causality between GDP and EXP, (c) a unidirectional causality from EXP to IMP (d) a 1% raise in IMP cause to a 0.19 % increase in GDP, (e) a 1% raise in EXP cause to a 0,34 % increase in GDP. The long-term results revealed (a) a 1% raise in IMP cause to a 0.35 % increase in GDP (b) a 1% raise in EXP cause to a 0,60 % increase in GDP. 28% of the imbalances in a period can be recovered in the next period. The country-level outcomes confirmed a long-term relationship for Cyprus, Egypt, Iran, Israel, Jordan, Oman, Qatar, S. Arabia, Turkey and Yemen, but not for Bahrain, Kuwait and Lebanon. These findings support the feedback hypothesis, which argues bi-directional causality. International trade may seem necessary for sustainable growth in the long-term based on outcomes of PMG Estimator, it can be said that a structural transformation is necessary to eliminate import dependency in the short term.