TITLE:
Agriculture Sector Growth and Inflation in Ethiopia: Evidence from Autoregressive Distributed Lag Model
AUTHORS:
Endalkachew Kabtamu Mekonen
KEYWORDS:
Agriculture Sector Growth, Autoregressive Distributed Lag Model, Ethiopia, Inflation, Total Factor Productivity
JOURNAL NAME:
Open Journal of Business and Management,
Vol.8 No.6,
October
14,
2020
ABSTRACT: There is cross country difference about the relationship
between economic growth and inflation. Although the issue is the most
researched topic, limited studies were undertaken at sectoral level, such as the
relationship between inflation and agriculture sector growth. Therefore, this
study examines the effect of inflation on agriculture sector growth of Ethiopia
from 1980-2018 using Autoregressive Distributed Lag
model. Inflation has negative and significant long-run relation with
agriculture sector growth suggesting that inflation is harmful to agriculture
sector growth than stimulating it. Other regressors such as total factors
productivity, arable land and labour force growth have positive and significant
long-run relationship with agriculture growth. In the short run, the growth of
agriculture sector has positive and significant relationship with its lagged
value, capital, labour force, factors productivity, inflation and exchange
rate. Thus, to increase the growth of agriculture sector, government should
moderate inflation using prudent monetary and fiscal policy. It should also
monitor the efficacy and suitability of agriculture investment to countries
context. As land is fixed input, intensive agriculture and productivity
enhancing technologies should be applied. Increasing labour skill through training
could also increase agriculture output.