Analysis of Causality and Export-Led Growth Hypothesis (ELGH) in Ethiopia
No Thumbnail Available
Date
2005-07
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
A.A.U
Abstract
It is generally believed that for a developing country export performance plays a pivotal role
in providing the much-needed impetus for economic growth. Export-led growth has been put
forward as the efficient alternative to inward- orientation strategies of development. This is
because it is believed to lead to higher total-factor-productivity growth and encourage foreign
direct investment.
In spite of the presence of numerous studies on the relationship between exports and economic
growth, empirical investigations to-date have produced mixed or contradictory results; while
most cross-section studies have found a positive association between export and growth, a
considerable number of time series methodologies found mixed results, either supporting or
rejecting the export-led growth hypothesis.
This paper examines the Export-led growth hypothesis (ELGH) for Ethiopia for the period
1960-2004. It builds up on Feder's (1983) model to investigate empirically the relationship
between exports and economic (GDP) growth using recent data from the National Bank of
Ethiopia. The study finds that the ELGH is valid in this particular case but, only in the long
run.
Although the results of the study suggest that exports have a positive effect on the overall rate
of economic growth and could be considered an "engine of growth" as the ELGH advocates,
their impact was not, however, statistically supported in the short-run. , Moreover, causality
was found running from GDP to Export confirming uni-directional causality.
Description
Keywords
Causality and Export-Led, Hypothesis (ELGH) in Ethiopia