An Auto Regressive Distributed Lag (ARDL) Approach to Understanding the Impact of Agriculture, Industry, and the Service Sector on GDP in Bangladesh

Abstract

The agriculture, industry, and service sectors are the three main sectors of Bangladesh's economy. Using the ARDL model, this study experimentally investigated the short-term and long-term effects of these three sectors on Bangladesh's GDP from 2005 to 2022. This study based on secondary data collected from World Development Indicator, World Bank. The intended results have been determined by applying a variety of econometric time series analysis techniques, such as the Augmented Dickey-Fuller test, the Autoregressive Distributed Lag (ARDL) bound test and the Granger Causality test. The Augmented Dickey-Fuller test has assured that neither series is integrated at level two. The outcome of the F-bounds test confirmed that the existence of a long-run relationship among the examined variables. The short-run and long-run coefficient revealed that there exists a positive impact of the agriculture, industry and service sector on GDP in Bangladesh. The long-run result shows that a 1% increase in agriculture sector increases the GDP by about of 0.173%, a 1% increase in industry sector increases the GDP by about 0.294%, and a 1% increase in service sector increases the GDP by about 0.533%. The short-run result shows that a 1% increase in agriculture sector increases the GDP by about 0.204248%, a 1% increase in industry sector increases the GDP by about 0.348179% and a 1% increase in service sector increases the GDP by about 0.631402%. The result of Granger Causality test shows that service sector and GDP Granger cause bi-directionally. All the outcomes are theoretically consistent and the policy recommendation are made based on our findings.