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Determinants of Exports in Developing Countries

E. A. A. Hmad

Published 2008 in Unknown venue

ABSTRACT

According to the orthodox classical economist as we ll to the modern liberal view trade is equivalent to an engine of economic growth . Exports promotion strategy is often in accordance with the principle of comparative adv antage, when a country specialises in a product, which it can produce competitively. The goods become available to the community of the world at cheaper prices. The marke ts are extended. The internal and external economies are attained. Income and employm ent levels expand. Consequently process of economic development is facilitated. In a utshell, putting more emphasis on the promotion of exports would permit the optimal a llocation of world resources and, therefore, returns from trade sector depend upon ac celerating growth of exports. The proposition of FDI led exports growth is contro versial in empirical literature. But the role of domestic investment is believed to be much important for export expansion strategies. In any case the importance of FDI, if any, cannot diminish the role of productive investment from the domestic economy. While private domestic investment can be regarded as a permanent and reliable channel to enhance production capacity, investment in public sector has been considered imp ortant, for example in roads, communication and other public goods and services t hat are essential to stimulate private investment. Furthermore, government has a decisive role through support for research and contract with foreign buyers as well as in faci litat ng access to credit to both directly and indirectly exporting terms. Funke and Holly (1992) argue that the majority of t he previous approaches have emphasised demand factors. Such models have general ly been rather unsuccessful in explaining long run trends in export performance. 1 The study takes into account both supply side and demand side factors and applies the model to the West German manufacturing sector using quarterly data over the period 1961.1 to 1987.4. The findings of the study suggest that supply side factors are m uch more important for explaining export performance than demand side factors. Togan (1993) investigates the changes in the struct ure of export incentives in Turkey from 1983 to 1990. The export incentives are export credits, tax rebate scheme, premium from the “Support and Price Stabilisation F und”, duty free imports of intermediates and raw materials, and exemption from the value added tax, foreign

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