The relationship between trade and economic growth: The case of Afghanistan

The effect of foreign trade on economic growth has been discussed by economists since Mercantilism. However, after the Second World War, in addition to theoretical discussions, the potential impact of foreign trade on economic growth has also started to be examined in empirical studies. In this study, the relationship between foreign trade and economic growth for Afghanistan in the period between 1980 and 2017 was examined. For this purpose, since in the unit root tests, all three variables provided the first order stationary condition, cointegration test was performed. In the analysis, at least one cointegrated relationship was determined. This shows that all three variables move together in the long term. Then, the Granger causality test was conducted to determine the direction and presence of the relationship between the variables. According to the results of the Granger causality test, a two-way causality relationship was found from exports to economic growth and from economic growth to exports. However, there was a one-way causality relationship from imports to economic growth, but no causality relationship between imports and exports. Keywords: Foreign Trade, Economic Growth, Export, Import, Cointegration, Granger Causality