Agriculture and GDP Causality Nexus in Morocco: Empirical Evidence from a VAR Approach

Abstract

The agricultural sector continues to be the backbone of the Moroccan’s economy, employing 38% of the active working population and contributing to 13% of Gross Domestic Product (GDP). However, Moroccan agriculture is subject to multiple constraints, including volatility due to climatic conditions which continue to condition the economic performance of the country as a whole, despite the decrease in the share of agriculture in the sectoral composition. The main objective of this study is to econometrically explore the causality nexus between agriculture and GDP in Morocco, especially since the sector has benefited from new development strategies. Using Moroccan time series over the period 1980 to 2017, the paper employed the Granger causality based on the vector autoregressive model (VAR) in a dynamic multivariate framework, using five macroeconomic variables: GDP per capita, agricultural GDP, investment rate, money supply, and trade openness. The empirical results from the analysis detect the presence of bidirectional Granger causality between agriculture and GDP, implying a feedback relationship, and some unidirectional causal relationships involving the other macroeconomic variables used in the VAR model. The findings have important policy implications for the government to establish effective agricultural strategies, in particular with the inauguration of the new agricultural strategy «Green Generation» in 2020.