l, 1990, p. 339). The correctly specified equation is y = a + b(xw) {where w represents the proportion of exports to total economic output} (Thirlwall, 1990, p. 339).
Since 1980, exports have played a critical role in the economic growth of many developing economies (Arize, 1990, p. 891). Stability in export expansion has been seen as a requirement for sustaining a steady rate of economic growth (Arize, 1990, p. 891). A number of econometric models have been proposed to (1) describe the relationship between exports and economic growth and (2) permit the reliable estimation of economic growth based on the relationship between exports and economic growth. For developing economies, two of the more significant of these econometric models are (1) the Harrod foreign trade multiplier model introduced by British economist A. P. Thirlwall and (2) a two stage least squares model introduced by American economist Augustine Arize (Bairam, 1990,, p. 711; Arize, 1990, pp. 892 896).
The basic Harrod foreign trade multiplier model consists of two main equations. These two equations, together with their specifications, are as follows: X = (Pd/P?)?Z?, and
?, ?, ? > 0, ? < 0, and X, M, Y, and Z are exports, imports, domestic income, and world income, and where (Pd/P?) is the ratio of domestic prices to foreign prices measured in a common currency (Bairam and Dempster, 1991, p. 1719).
Considerations of time and assumptions that (1) the current account is continuously balanced and (2) relative prices measured in a common currency are constant over time leads to several implications. Significant among these implications are the following.
1. Economic growth (income) is determined by Harrod's foreign trade multiplier (1/?) and the rate of growth of exports (x), where x is equal to ?Z (Bairam and Dempster, 1991, p. 1720).
2. As the two "income elasticities (? and ?) reflec...