Abstract:

The relationship between a country’s exports and national income levels is a long-debated topic of trade and growth theories. Since a causal relationship between export and national income will bring outlined policies to a superior position compared to internal policies, this debate is of great importance in defending the theses of ‘free trade’ (export-based growth) or ‘protectionality’ (export residence). In order to test the export-based growth hypothesis, this study has studied the causality relationship between foreign trade (export and import) and national income for Turkey and seven new developing countries using Granger causality analysis. The results from the study show that the hypothesis tested for Argentina, Brazil and India from eight countries in the study is not supported, while the examples of Turkey, the Czech Republic, Hungary, Poland and China show that there is a strong causal relationship between export and national income.

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