This paper examines the nature, as well as the strength of the causal
relationship between real exports growth and real GDP growth for Fiji.
Granger causality tests, under a VAR framework, were used to examine
whether growth in real exports causes real GDP growth or vice versa.
Moreover, in an effort to gauge the strength of the causality, the paper
tested the influence of a third variable by using Block Exogeinity tests.
Other measures, f-tests and variance decomposition tests, were also used to
assess the strength of this relationship on an in-sample basis. Overall, the
results showed that growth in real exports does cause real GDP growth.
Moreover, it was found that the trade-weighted trading partner GDP
(lagged one year) and real imports, from the late 1980s, have played an
important role in enforcing the relationship between real exports growth
and real GDP growth. In broad terms, therefore, the results of this study
are supportive of the export oriented, outward-looking approach to trade
relations adopted by policymakers over the past decade.