Causality Relationship between Agricultural Exports and Economic Growth in Ethiopia: A Case of Coffee,Oilseed and Pulses

Abstract

This article investigated the causal relationships between agricultural exports and economic growth (GDP) in Ethiopia usin time series data for forty one years from 1973 to 2013. The study used Augmented Dickey Fuller (Dickey and Fuller, 1979) and Phillips-Perron(PP) (Phillips and Perron, 1988) to test for unit root and Granger  model to test causality. The result of stationarity test reveals that the null hypothesis that the variables have a unit root is not rejected in the case of all the variables at level form I (0). However, the null hypothesis that the first-differences of these variables have a unit root is rejected. This showed that, the series data is stationary at first difference and hence the variables are considered as integrated of order one or I (1) process. On the other hand the causality relationship found that there is bidirectional relationship between coffee export, oilseed export and economic growth whereas unidirectional relationship was found between pulses export and economic growth which is running from pulse export to economic growth (GDP). Based on the findings, it is recommended that policies aimed at increasing the productivity and quality of these cash crops should be implemented. Also additional value should be added to them before exporting. Correspondingly, there is also a need to devote resources on the production of non-export goods in order to increase exports since they have bi directional relationship. When this is done, it will lead to a higher rate of economic growth in Ethiopia

Keywords: Agriculture, Agricultural exports, Economic growth, causality