Abstract
This study attempts to investigate the determinants of industrial output in Syria over the period 1980–2010. The ADF unit root test, Johansen cointegration test, Granger causality test, impulse response functions, variance decomposition analysis, and stability tests are used in this study. The Johansen cointegration test indicates that industrial output is positively related to capital, manufactured exports, population and agricultural output, but negatively related to the oil price. Agricultural output has the biggest effect on industrial output. The Granger causality test indicates bidirectional causality between capital, oil price, manufacturing exports, population, agricultural output, and industrial output in the short and long run.
Highlights
The industrial sector plays a crucial role in the development of the Syrian economy, and it accounts for about 25 % of its GDP
Where α is the intercept; β1, β2, β3, β4, and β5 are the coefficients of the variables; lnIO is the natural log of industrial output in real value; lnGFCFI is the natural log of gross fixed capital formation of industry in real value; lnOP is the natural log of oil price (US dollars per barrel); lnMX is the natural log of manufactured exports in real value; GPOP is the population growth rate; lnAO is the natural log of agricultural output in real value; and εt is the error term
The result implies that capital supplies producers with funds to buy industrial equipment, and any change in industrial output leads to a change in the return from industrial production, which in turn affects the gross fixed capital formation of industry
Summary
The industrial sector plays a crucial role in the development of the Syrian economy, and it accounts for about 25 % of its GDP. This sector has a diversified base, and the most important industries in Syria are oil refining, basic metal, metal products, chemicals, electricity, water, paper, food and textiles (Syrian Investment Agency (SIA) 2009). The productivity and competitiveness of the Syrian industrial sector in the global markets are low, which led to the decline in the volume of industrial exports (Naser et al 2006). The inadequate support by the government to enhance its competitiveness, lack of industrial investments and high cost of industrial funding further hampered the growth of this sector (Lahham 2010)
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