Export expansion has a positive effect on economic growth, through increased investment and the expansion of imports, which are essential to improving productivity and increasing economic growth. In turn, economic growth can lead to further export expansion and diversification by increasing the country’s capacity to finance imports used as inputs for export-oriented production, creating cumulative bi-directional causation.
However, the degree to which exports positively affect economic growth and, in turn, further expansion of exports, depends on the categories of exports and imports in which the expansion occurs. For example, reliance on primary exports can impede economic growth, as this category of exports is subject to excessive price fluctuations and does not offer knowledge spillovers to non-export sectors in the way manufactured exports do. In contrast, primary imports can contribute positively to economic growth, as this category of imports can be used as inputs for export-oriented manufacturing production, leading to further export diversification. In the case of a small oil-producing country like Kuwait, the most important question for its economic future is how to foster sustained economic growth as the export demand for oil peaks and begins to decline. This project is intended to inform policy discussions around this question by examining the causal relationships between disaggregated exports, disaggregated imports and economic growth in Kuwait over the period 1980-2018.
Athanasia is a Research Officer at the LSE Middle East Centre.
Dr Ahmad Al-Awadhi
Ahmad is an an Associate Research Scientist at the Kuwait Institute for Scientific Research.
Dr Sulayman Al-Qudsi
Sulayman is a Principal Research Specialist at the Kuwait Institute for Scientific Research.
Dr Trevor W. Chamberlain
Trevor is Professor and Chair of Finance and Business Economics at McMaster University in Hamilton, Canada.