Export-Led Growth Theory Essay Example | Topics and Well Written Essays - 1250 words

Export-Led Growth Theory - Essay ExampleHowever, this is not always the case for near domestic markets since governments may seek to nurture blossoming industries to ensure their incr simplicity and capacity to exploit their potential comparative advantage (Liebler & Ward 1992, p. 339). Notably, export-led growth is prevalent in a majority of underdeveloped rural area, but the theory does not always guarantee success in the long term. This paper will examine the successfulness of the export-led growth model, taking into good will a predominantly export-oriented country such as china to demonstrate how export-led orientation is not always effective in ensuring growth. In the adoption of export-led frugal systems, governments often have to institute a number of measures such as tariff reduction, establishment of a floating exchange rate, especially through the devaluation of the home(a) currency to enhance exports and government assistance for exportation industries and sector s (Liebler & Ward 1992, p. 338). The purpose of export-led strategy is to discover a niche market in the global scrimping for a countrys exports. Export-led growth has long been touted as a way of enhancing economic growth and maturity. Nations such as South Korea, Taiwan and China had implemented successful export-led growth strategies. However, global economic recessions such as the one witnessed between 2007 and 2010 have cast doubts on the success of export-led growth because of its dialect on the specialised, internationally based economy, which is susceptible to global changes in demand trends. According to Yang (2008, p. 3) the term export-led growth refers to the successful growth episodes characterised by growth in a countrys export. Yang (2008, p. 3), however, poises that if export-led growth was the real justification for episodes of high growth in GDP and exports, then countries that adopted the system should have experience appreciation in real exchange rates. This in cident is primarily as a result on influx in foreign exchange as a consequence of the booming exports. However, this is not the case since only about half of the export-led growth episodes are characterised by exchange rate appreciation. In most instances, export-led growth is unsuccessful since it results in the depreciation of countries exchange rates hence the conclusion that the high export growth is not ideally safe growth for a country. In essence, the export-led growth theory is not the overriding force for growth episodes categorized as high export growth since the non-tradable sector alike plays a critical role in eliciting high economic, as well as export growth. China continues to experience massive structural imbalance issues as a consequence of adopting an export-led economic strategy in earlier years (Yang 2008, p. 5). Although the country boosts of high rates of economic growth, its imbalance problems continue to wreck mayhem to the viability of its economic stance o n the long term. The imbalance problems are deeply rooted in the countrys double transition, and will only ease when the nation completes its final transition in the next two decades, which is quite a long period. Meanwhile, the imbalances caused by the implementation of an export-led economy may result in severe political and social unrest, which may impede Chinas growth trajectory. On the other hand, export-led growth is not successful since it subjects a countrys economy to undue exposure to the international world. By definition, an