Exchange Rates, Imports of Intermediate and Capital Goods and GDP Growth in Belarus

The paper analyses the short-term and long-term effects of the imports of intermediate and capital goods on Belarusian economic growth for the period 2005 to 2015 taking into account large upward and downward exchange rate adjustments of the Belarusian ruble. The empirical findings from the autoregressive distributed lag regressions indicate that there are negative effects from the import of intermediate goods on economic growth both in the short-run and long-run.

Secondly, contrary to the commonly-held theory, the devaluation of the Belarusian ruble negatively affects both GDP growth and the import of intermediate goods in Belarus. Thirdly, the results of the Toda–Yamamoto test for Granger causality show that GDP growth causes growth in imports and exports, supporting the hypothesis that trade is more a consequence of the rapid economic growth in Belarus than a cause. Fourthly, the findings from the forecast error variance decomposition (FEVD) confirm results obtained from the Toda-Yamamoto causality test and emphasise, in addition, that changes in imports in Belarus are mostly driven by changes in exports, especially in the long-run. Finally, the findings from the FEVD also indicate that the main cause of growth fluctuations is domestic capital investments.