Exports and Economic Growth in Ethiopia: an Empirical Investigation
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Date
2002-06
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Addis Ababa University
Abstract
This study investigated the effect of exports on economic growth in Ethiopia for the period 1960/61-2000/01. The study aimed to review the policies undertaken by the different regimes in relation to export policies, and to empirically test the relationship between exports and economic growth using different techniques. In addition, attempts were also made to examine the supply (structural) constraints to export growth in Ethiopia.
To test the export-economic growth relationship, in addition to using the frameworks that have been followed by most of the previous studies, an extension to the previous studies was made by introducing cointegration and error correction approaches in the regression analysis. Furthermore, a simultaneous equation model and the Granger causality test were conducted to examine the indirect effects of export on economic growth and to address a possible simultaneity problem that may arise because of the correlation between export and economic growth.
The results from the cointegration and error correction models revealed that export
significantly affected economic growth in the short run. In addition to its direct effect, export is also found to indirectly affect economic growth as evidenced from the simultaneous equation models. Furthermore, the causality test conducted indicated that causality runs from exports to economic growth. The key finding in this study is that export growth positively and significantly affected economic growth and the result is not sensitive to the methodologies used.
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Economic Policy Analysis