Theoretical and Applied Economics (Jun 2022)
A comparative analysis of export-led and domestic demand-led growth hypotheses in BRICS economies
Abstract
The elevation of economic growth and development of an economy has always been a prime concern for nations. In this context, exports and domestic demand are the two economic growth components that promote and accelerate economic growth. While exports are given more emphasis whereas domestic demand is underestimated. Moreover, the present study argues the superiority of domestic demand-led growth over export-led growth. As a novel contribution, the study compares export-led growth (ELG) and domestic demand-led growth (DDLG) hypotheses by employing a newly developed methodology for BRICS for the period 1991-2019. The data in the study is found to be heterogeneous and cross-sectionally dependent. Therefore, the study further employs Dumitrescu-Hurlin causality test, common correlated effects (CCE) mean group estimator which considers cross-sectional dependence and heterogeneity between the variables. Our findings support both hypotheses and also report that DDLG contributes more towards the economic growth of an economy than ELG. Based on the results, the study claims that ELG and DDLG are complementary to each other rather than competitive.
