EXPORT INSTABILITY AND ECONOMIC GROWTH
This research explores the relationship between export instability and economic growth. The dual focus in this exploration is on the functioning of the relationship in developing countries and econometric models that may be used in the application of the relationship to the economy of the State of Kuwait.
The General Relationship Between Exports and Economic Growth
A widely made claim is that "both historically and in the contemporary world economy, trade has been the engine of growth" (Thirlwall, 1990, p. 338). A further contention is made that almost no example of a country may be found that has "for a long period sustained a growth rate substantially higher than its growth of exports" (Thirlwall, 1990, p. 338). Econometric studies have also found that, since 1950, growth rates for individual countries "correlate better with their export performance than with any other single economic indicator" (Thirlwall, 1990, p. 339). In this context, it is said that:
The statistical evidence for today's developing countries is not unequivocal, but in general it supports the hypothesis that the growth of exports plays a major part in the growth process by stimulating demand and encouraging savings and capital accumulation, and because exports increase the supply potential of the economy by raising the capacity to import (Thirlwall, 1990, p. 339).
The growth of exports "must be expected to have more of an effect on . . . growth in a country where exports account for 50 per cent of output than in a country where exports account for only 5 per cent of output" (Thirlwall, 1990, p. 339). With this fact in mind, it becomes apparent that the estimating equation y = a + b(x) {where y represents overall economic growth and x represents the growth in exports} is a mis specification because the equation does not account for the relationship of exports to the total output of the economy (Thirlwal...