Econometrics

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Browsing Econometrics by Subject "contribution to GDP and cointegration analysis"

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    The Growth of Industrial Manufacturing in Ethiopia and its Contribution to GDP
    (Addis Ababa University, 2007-03) Rissa, Urgaia; Barr, Tavis (PhD)
    This paper analyses growth of Industrial Manufacturing in Ethiopia and its contribution to GDP over the past 4 and 3/10th decades. In general, industrialization plays an important role in economic development. In this regard, the manufacturing sector plays the key role in growth process. Despite the importance of industrialization in Sustainable Economic Growth, the sector has encountered with a serous growth problem that leads to insignificant contribution to GDP, due to financial constraint, shortage of supply raw materials and lack of skilled manpower. The general objective of this study is to examine the growth of the sector and its contribution to GDP, using Secondary data from the NBE and C.S.A, which covers 43 years. The study employs the methodology of Johansen cointegration analysis of Econometric Time- series models. To identify the effect of various factors determining the growth of the sector, the FIML procedures are employed instead of OLS or 2SLS regressions, because it provides a worthwhile measure to generate more efficient and effective estimates that explain the relationships. These techniques are used to validate the theoretical assertion that there is one cointegrating relations in this study. The analysis indicates that the long-term growth rate of investment is positively related to the weight placed on growth of the sector and is playing significant role in expanding its activities. While that of labor engaged in production, is the short-run effect and hence, the sector is characterized as labor intensive. In the meantime, the sector growth is negatively influenced by total factors of production that represent the obsolete uses technological level in manufacturing activities accounts for the sector’s stagnant growth. That is why the overall growth rate of sector is negligible, only about 0.24 percent per annum. In terms of contribution, the share of the sector accounts about 6 percent to GDP. That is, almost about 1/11th of Agriculture and 1/6th of Service sector, on average since 1962. From these analyses, therefore, it would be probably drawn that the growth and the role of industrial sector in Ethiopian economy is insignificant, implies, the level of industrialization is very low. Thus, the policymakers would focus on the implications of this paper to mitigate the problem and achieve the designed goal of Sustainable Economic Growth.Keyword: Manufacturing growth, contribution to GDP and cointegration analysis.