Economic and Financial Analysis of Global and National Developments

Abstract

In this book chapter, in addition to examining the link between exports andemployment by concentrating on bidirectional causality rather than one-way causality, the economic growth variable was also included in the model. The aim of this book chapter is examining the causal relationship between employment, exports, and economic growth in the USA from 1990 to 2019. The estimation results are analyzed using the Johansen cointegration test, the Granger causality test based on the vector error correction model (VECM), theimpulse-response function, and variance decomposition. One of the chapter's key goals is to establish the short- and long-term effects of exports and economic growth proxied by GDP on employment. Employment is therefore considered as an endogenous variable. Exports, employment, and GDP data belonging to 1990-2019 period are collected from World Bank. The USA was chosen for the analysis since it is one of the most developed exporting countries in the world, and the time interval is adjusted to encompass the 30 years preceding the last time data are available. The effects of the exports increase on employment were searched with the input-output analyses at the industrial or firm levels in many studies. This study measures the effect of exports on employment in USA by also using the GDP data as a proxy of the economic growth. In this book chapter the data were analyzed by using the methods of time series analysis. Granger causality analysis indicates the existence of causality running from exportsand GDP to employment in the long run. In addition, it was discovered that both export and GDP have a negative and significant effect on employment separately in the long term. In the short run, only the existence of unidirectional Granger causality between GDP and employment was found to be statistically significant. In the short run, only the existence of unidirectional Granger causality between GDP and employment was found to be statistically significant. The GDP has a negative long-run impact on employment but a positive short run impact. According to the IRF, GDP shocks have a significant and positive effect on employment that lasts for six periods. Export shocks appeared to have no impact on employment. The results of variance decomposition reveal that while GDP contributes significantly to employment changes in the short run, on the other hand in the long run exports contribute significantly more. The findings of the study are not consistent with traditional international trade theories, but they are consistent with recent findings.