Abstract:
This study investigated the causal relationship between export and economic growth in
Ethiopia using quarterly data on real GDP and real export for the period 1997/98-
2010/11 from national bank of Ethiopia. The study reviewed the trends of export and
economic growth of Ethiopia during the current government. To test the relationship
between export and economic growth, the researcher used bi-variate model without
exogenous variable. The major proxy variables employed in this study are real GDP for
economic growth and real export for export growth of goods and services. The long run
relationship was assessed using Johansen co-integration technique and the error
correction model was used to analyze the short run relationship and the speed of
adjustment towards long run equilibrium.
The Johansen co-integration procedure was applied and the results of the co-integration
test proved the existence of a single co-integrated equation. The co-integration test
confirmed the existence of long run relationship between export and economic growth in
Ethiopia. The ECM regression result shows that there is no significant short run as well
as long run causal relationship from export to economic growth. It also proved that there
is a significant long run causal dynamism from economic growth to export growth, but
the case in the short run is not significant at 5%.
So, the ECM causality test result confirmed that there is only long run uni-directional
causal relation from GDP to exports. To achieve economic growth of the country, the
policy makers or the government should give high attention for the production of
exportable as well as non-exportable products.
