ASSESSING EXPORT OPTIMISM VERSUS EXPORT PESSIMISM IN TROPICAL COUNTRIES

This paper attempts to reconcile two major conflicting viewpoints regarding the effects of export expansion on economic growth. The first, export optimism, looks to supply factors such as international competitiveness with the view that a favourable export performance results in significant economic growth for a country. The second, export pessimism, argues that exports only contribute significantly to a country's economic growth when the external demand is favourable. Using the Expansion Methodology, the paper shows that the effects of demand and supply factors on the relationship between export growth and economic growth are about the same. The results suggest that while unfavourable demand weakens the aforementioned relationship, tropical countries can offset this by being competitive in their exports. They also caution against excessive weight being given to export‐promotion by export optimists as the exports‐growth relationship weakens considerably when the external demand falls.