ANALYSIS OF FACTORS AFFECTING AGRICULTURAL OUTPUT GROWTH IN ETHIOPIA: MACRO-ECONOMIC PERSPECTIVE
2019
Degu, Adisu Abebaw
Agriculture sector plays a decisive role in economic growth and development, especially for developing countries. Many scholars believed that macroeconomic policy changes have substantial effects on agricultural economy and analyzing this effect is valuable for designing suitable agricultural policies. This study examined the effect of some macroeconomic variables on agricultural sector output of Ethiopia from the year 1991 to 2017. The study employed Autoregressive Distributed Lag (ARDL) bounds test approach and error correction model (ECM). Accordingly the study found a long-run relationship between agricultural sector output and macroeconomic variables such as; inflation rate, lending rate, trade balance, foreign direct investment, exchange rate and external debt stock. Trade balance which is negative throughout the study year and, external debt stock have a negative effect on agricultural sector output; both in the long-run and in the short-run. The official exchange rate and lending rate have a positive and significant effect. However, inflation rate and foreign direct investment have insignificance effect on agricultural output. Thus the concerned body needs to improve the nation’s trade balance by applying a policy that enlarges export. Finally, the government has to limit its external debt, and mobilize and use domestic productive capital more efficiently.
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