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
Highlights
After Johansen co-integration test witnessed the variables are co-integrated; VECM employed to examine the causality between sectors export and economic growth both in the short run and long run
The findings reveal in the long run the existence of unidirectional causality which runs from economic growth to agriculture, industry and service export separately
That is there is unidirectional causal relation only between service export and economic growth and the direction of causation runs from economic growth to service export
Summary
During the same period export grew by 20 percent with the dominance of primary commodities in general and coffee with 26.4 percent in particular Despite these figures give evidence regarding the existence of some link relationship between export and economic growth in Ethiopia they can’t give surety about whether the export sector has been backing up Ethiopian economy in its double digit growth rate. To this end some authors had examined over the relation between export and growth in the case of Ethiopia. This is because the model has gained reputation or ability to guarantee stationarity and to make available extra channels through which bi-directional causality can be examined when two variables are co-integrated
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