Relationship between Export, Imports and Economic Growth: An Export-led Growth Strategy for the Gambia Using The Granger Causality Test

Abstract

The paper investigates the relationship between exports, imports and economic growth in the Gambia using Granger causality analysis. The data was obtained from the World Development Indicator (WDI) and the periods covered were 1980-2017. The main aim of the study was to identify the relationship between import, export and growth in the Gambia. We added the exchange rate to have more views of their relationship with growth. The method used was Granger-Causality tests. According to the results, there is a causal relationship between growth rate and imports and imports and growth rate (bidirectional relationship). Exports do not Granger cause growth. Based on the outcome of the causality test, change in economic growth does not help explain the changes in exports, but it does for the change in imports of The Gambia. Exchange rate Granger causes growth in the Gambia. These provide evidence that imports is a source of economic growth in The Gambia. Overall import and exchange rate have a positive effect on growth.