Cointegration and Causality between Exports and Economic Growth: Evidence from Nigeria

Abstract

The study examines the long run link between export components of oil, non-oil sector and economic growth in Nigeria for the period 1981 - 2015. The empirical analysis is based on Johansen’s cointegration technique to establish the long run relationship, and Granger causality test within a vector autoregressive framework to determine the direction and short run causality. The results support the growth-led export hypothesis in the long run and export-led growth hypothesis in the short run. Hence, the study recommends that current macroeconomic policies aimed at promoting investment in the non-oil sector should be expanded, and profit based market incentives should be increased to encourage more active labour participation in the non-oil sector of the Nigerian economy.

Keywords: Cointegration, Causality, Exports, Economic growth, VAR