Trade openness and economic growth: is growth export-led or import-led?

Most previous investigations have only focused on the effect of export expansion on economic growth while ignoring the potential growth-enhancing contribution of imports. This article re-examines the relationship between trade and economic growth in Argentina, Colombia, and Peru with emphasis on both the role of exports and imports. Granger causality tests and impulse response functions were used to examine whether growth in trade stimulate economic growth (or vice versa). The results suggest that the singular focus of past studies on exports as the engine of growth may be misleading. Although there is some empirical evidence supporting export-led growth, the empirical support for import-led growth hypothesis is relatively stronger. In some cases, there is also evidence for reverse causality from gross domestic product growth to exports and imports.