Effect of Export Diversification on Economic Growth in Ethiopia

This study investigates the effect of export diversification on growth. The study applied an extended Cobb-Douglas production function model using data sourced from the World Bank Indicator database, ranging from 1994 to 2024. The ARDL model was applied to examine the short-run and long-run effects of export diversification on economic growth; besides this, to ensure directional causality, the Granger causality test was conducted. The result revealed that in both the short run and the long run, export diversification has a positive and significant effect on growth. Besides this, the result showed that in the long run gross capital formation and real effective exchange rates had a positive and significant effect on economic growth. The Granger causality test result shows that there is a unidirectional relationship between growth and export diversification. Based on the findings, the study suggests a multifaceted policy strategy to shift Ethiopia's agricultural export industry away from reliance on raw commodities to a more competitive, diversified, and value-added structure.