According to economic theory, fast-growing countries should be running trade deficits, but the evidence is that, in fast-growing countries, the causality is from exports to growth.

Question

Quizplus · Accepted Answer

Economic theory suggests that fast-growing countries may run trade deficits due to increased imports for investment and consumption. However, empirical evidence often shows that in many fast-growing countries, export-led growth is a significant driver, indicating a causal relationship from exports to economic growth.

According to Economic Theory, Fast-Growing Countries Should Be Running Trade