Causal Relationship between Agriculture, Industry and Services Sector for GDP Growth in Bangladesh: An Econometric Investigation

Abstract

This study examines the contribution of agriculture, industry and services sectors to economic growth in Bangladesh by using time series data from 1980 to 2013. Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests show that the time series data stationary at first difference. Then, the cointegration analysis indicates that each economic sector has strong, positive and significant linear relationship with economic growth. Granger causality test found bi-directional causality between agriculture and GDP and also industry and agriculture. This empirical study also found the unidirectional granger causality from services sector to agriculture and industry sector to services sector. Finally, the Vector Error Correction Model (VECM) also used to examine the short and long run equilibrium relationships among the variables. This study gives the guideline to the investors and policy makers.

Keywords: economic growth, economic sectors, econometric analysis, Bangladesh