The Impacts of Export in Stimulating Economic Growth in Ethiopia

The study uniquely investigates the impacts of export performance and its volatility simultaneously, filing literature gap of their combined impact on Ethiopia's economic growth and their causality, focusing on the export-led growth strategy of the country. Data from 1974/75 to 2017/18 was used from sources like the IMF and WB. The analysis utilized the extended Cobb-Douglas production function based on endogenous growth theory. Initial unit root tests revealed mixed stationarity, bound and Wald tests confirmed long-run co-integration among variables. Correlation analyses supported the associations, while model diagnostics confirmed the model's fit. ARDL was used for long-run and short-run parameter estimation and VECM for short-run estimation. Granger causality tests assessed the relationship between exports and economic growth. Findings indicate that, in the long run, export performance significantly boosts RGDP, while the coefficient of variation (CV) negatively impacts it. This shows the export lead-growth strategic policy is soundly significant and hence government has to continue this policy. While in the short run, gross capital formation (GCF) and CV positively influence RGDP, whereas other variables have negative effects. This depicts that export performance has no positive spill-over effect to other sectors. Commodity concentration (CCI) is significant only in the short run, showing as there is less commodity diversification of the country. The causality test shows unidirectional causality from exports to RGDP in the long run and from both exports and RGDP to CCI in the short run. Moreover, there is a mono-cultural export structure. Hence, enhancing capital formation, technology, skilled labor, diversifying exports, and focusing on primary products at which Ethiopia has a comparative advantage is vital to accelerate economic growth of the country.