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Please use this identifier to cite or link to this item: http://hdl.handle.net/123456789/3253

Title: CAUSALITY ANALYSIS OF TERMS OF TRADE AND ECONOMIC GROWTH OF FIVE EAST AFRICAN COUNTRIES: VECTOR AUTOREGRESSIVE APPROACH
Authors: YEKIN, AHMED
Advisors: Dr. Syed Hasan,
Keywords: economics
Copyright: Jul-2011
Date Added: 4-Jul-2012
Publisher: AAU
Abstract: This thesis analyses causal linkages between terms of trade and economic growth in five East African countries using annual data for the time period 1980-2009. It also analyses the impacts of openness and financial development on economic growth and terms of trade. To achieve these objectives: unit root (ADF and PP tests), co integration (Johansen’s procedure), and Grangercausality (Wald coefficient restriction test, 2 and F- statistics) are carried out. The results of the unit root tests show that the series of the interest are stationary in first differences. Co-integration and causality between terms of trade and economic growth are tested and compared using two types of bi-variate vector autoregressive models: models without exogenous variables VAR (p), and models with exogenous variables VARX (p, b). The results of co-integration tests on both types of bi-variate models show that two Granger-causality alternative models (VAR in first difference and Error Correction Models) fit for this study. In both types of models, Grangercausality (unidirectional or bidirectional causations) between terms of trade and economic growth are tested using Chi – square and F – statistics from Wald coefficient restriction test: terms of trade causes GDP and GDP causes TOT hypotheses are accepted in all countries investigated more for VARX (p, b) than for VAR(p). Openness, in this study, is found to result in negative growth in Ethiopia, Burundi and Rwanda and in positive growth in Sudan and Kenya; and also found to deteriorate terms of trade of Ethiopia and Rwanda while it has no impact on terms of trade of other countries. The economic growth impact of financial development is positive for Burundi and Kenya whereas, it is negative for Rwanda and insignificant for Ethiopia and Sudan. The terms of trade impact of financial development is positive for Burundi and Kenya, negative for Rwanda and null For Ethiopia and Sudan. This study lends support to export friendly outward and inward oriented policies whose long term impacts are yet to be observed.
Description: A Thesis Submitted to School of Graduate Studies in Partial Fulfillment of the Requirements for the Degree of Masters of Science in Economics (International Economics)
URI: http://hdl.handle.net/123456789/3253
Appears in:Thesis - Economics

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