The Export-Led Growth Hypothesis The Philippine Case

This study aimed to find out whether the Export-Led Growth Hypothesis holds true in the Philippine. Multiple regression analysis was conducted to attain the objective of the study and the model generated were tested using Augmented Dickey-Fuller Unit Root Test Jarque Bera Correlation Matrix Durbin-Watson Test Auto-regressive Conditional Heteroskedasticity Test Chow-break point test Ramsey Reset Test and Johansen Co-integration Test to ensure the validity of model. The results of the study revealed that all the variables of the model passed unit root test at first difference. Analysis of correlation results showed that the rate of growth in real export and rate of growth in export budget had a positive relationship with the rate of growth in RGDP. Rate of growth in real export significantly affected the rate of growth in RGDP. A one percentage point increase in real exports brought about 0.001448 percent to RGDP growth. Rate of growth in export budget also significantly affected the growth in RGDP. Thus a one percent increase in export budget led to a 0.000221 percent rose in RGDPs growth rate ceteris paribus. Moreover the model itself was statistically significant with a goodness of fit or adjusted R2 of 0.65. The model also satisfied all the econometric criteria of absence of autocorrelation no trace of specification error and the stability of the regression parameters. Lastly the variables were cointegrated ruling out spurious regression results. In this study the Export-led growth hypothesis holds true in the Philippines based on the empirical results. A long run equilibrium relationship was present among the selected variables and the results therefore are not spurious. It can be said that an increase in export would lead to RGDP growth.