On the causal links between exports and economic growth in Costa Rica

A large body of literature has investigated the export-led growth (ELG) hypothesis, which states that export growth is a major determinant of output growth. Because of its economic and political realities, Costa Rica represents an interesting case study of the ELG hypothesis, which is tested using time series (1960 - 2011) and applying a modified version of the Granger-causality test. The path analysis technique is also used to account for direct and indirect effects of exports on GDP. The results show causal relationships between exports and Costa Rica's GDP, between imports and output, import and exports, and between imports and capital formation.