The causal relationship between imports and economic growth in the nine provinces of South Africa: Evidence from panel granger causality tests

This paper examines the causal relationship between imports and growth in nine provinces of South Africa for the period 1996-2011, using panel causality analysis, which accounts for cross-section dependency and heterogeneity across regions. Our empirical results support unidirectional causality running from economic growth to imports for Gauteng, Mpumalanga, North West, and Western Cape; a bi-directional causality between imports and economic growth for KwaZulu-Natal; and no causality in any direction between economic growth and imports for the rest of provinces. This suggests that import liberalisation might not be an efficient strategy to improve provincial economic performance in South Africa. Indeed, provincial imports tend to increase in some provinces as economic growth improves.