Sectors’ Export and Economic Growth in Ethiopia: (VECM Causality Approach)

Abstract

The link between export and economic growth has been interesting and rich source of debates among economists and many other scholars. Particularly looking depth into the logical disagreement of the scholars; it is revolves mainly around whether export-led growth hypothesis or growth-led export hypothesis hold true in the explicit circumstances for different countries. And this divergence is also the foremost purpose of this work in that the causal relationship between sectors’ export and output growth in Ethiopia examined using secondary time series data collected from national bank of Ethiopia, ministry of finance and economic development and World Bank development indicator data base. VECM model used and its result reveal, in the long run the existence of unidirectional causality which run from economic growth to agriculture, industry and service export disjointedly however in the short run it reveal the existence of unidirectional causality which runs solely from economic growth to service export, in other word  growth-led export hypothesis supported in case of Ethiopia. Therefore, to further develop and diversify export in Ethiopia, economic growth needs to be strengthening and diversified.

Keywords: export, economic growth, econometrics, VECM model and causality.

DOI: 10.7176/JESD/11-3-04

Publication date: February 29^th 2020