Modelling Export-led Growth Hypothesis: An Empirical Evidence from Sudan

The export-led growth hypothesis (ELGH) assumes that export growth is a key determinant of economic growth. It holds that the overall growth of countries can be facilitated by not only increasing the amounts of labor and capital within the economy but also expanding exports. According to advocates of the ELGH, exports can function as an engine of growth. This chapter analyzes the relationship between Sudan's income growth and exports from 1970 to 2020, implementing a system of equations using the Autoregressive Distributed Lag (ARDL) approach. The ARDL results revealed a long-run relationship between the variables considered in the estimated model. A negative lagged error-correction term coefficient was observed, which is highly significant in all cases supporting cointegration. The result reveals the existence of a long-run equilibrium relationship between GDP, export, import, labor force, and trade policy, confirming the validity of the export-led growth hypothesis in the Sudanese context. Thus, the most essential conclusion is that the economy’s export expansion strategy is entirely dependent on imports of raw materials and capital inputs and the kind of goods being exported. The coefficient of import is of particular significance, offering strong support for the import compression hypothesis. The most important policy implication of the findings is the implementation of an appropriate and optimal approach that can boost exports and hence increase economic growth substantially. Policymakers should focus on export diversification strategies and invest more in Sudan’s ability to provide value-added services in order to meet international export demand. It is recommended that future research on this topic be based on high frequency data and larger sample sizes to increase the reliability of the results. Additional studies are recommended to investigate Sudan’s export diversification, volatility, and performance, as well as its import contraction hypothesis.