Trade and Growth in Settler Economies: Australian and Canadian Comparisons

This paper analyses the historical relationship between exports, imports, and national income growth in Australia and Canada, using over 100 years of data for each country. I test for the presence of ìexport-led growthî and ìimport-led growthî in both countries over several time intervals, interpreting these concepts to mean a unidirectional causal ordering. I find no evidence to support the export-led growth hypothesis for Australia, but strong evidence for this hypothesis in Canadian data in the period 1915-38. The results here suggest a much stronger role for imports than has been found in previous analysis of Canadian data: imports as well as exports appear to lead growth over the 1915-38 period. In addition, import growth tends to be causally prior to export growth in both countries, but at different times. The strength of the relationship between trade and growth is generally comparable across countries. Finally, although there is little evidence of unidirectional causality in either country, there is substantial evidence of bi-directional causality.