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An-Najah University Journal for Research - B (Humanities)

Abstract

The Palestinian external trade over the period experienced a steady growth in imports, especially in the wake of the periods of suppression or witnessed a severe shortage, meanwhile exports started to grow slowly in the last decade and in recent years in particular. This study investigates the effects of the two components of foreign trade imports and exports on economic growth, once for merchandise trade and another for all trade by using econometrics analysis connects imports and exports to economic activity represented by GDP as a proxy for economic growth once and on development proxy of GDP per capita another one .Also, it examines the nature of causality between both imports and exports and economic growth and gdp per capita as an indicator of development. Mainly, study concludes a significant noticeable positive effect for imports growth on GDP, meanwhile exports growth not affecting GDP significantly. Considering total foreign trade including services we found a better performance of trade growth on economic growth. Distinctively, Granger Causality test shows a unidirectional causality from total imports on economic growth and from GDP per capita on total imports. This study recommends a number of policies which guide foreign trade so as to promote and serve the growth in economic activity and development in Palestine.

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