Is the Export Led Growth Valid for Ethiopia (Application of Co-Integration and Granger Causality Analysis)

This paper examined the Export led Growth Hypothesis for Ethiopia for the period from 1980-2007. It build up on the Riezman et al. (1996) model to investigate the relationship between exports and GDP growth using a relatively recent data set and deployed advanced methods of time series econometric analysis involving the Augmented Dickey Fuller (ADF ) Stationarity Test, the Johansen's Cointegration Procedure , Error Correction Model (ECM) and the granger's causality test. The empirical findings have shown that the Export led Growth is valid for Ethiopia in a particular case, only the long run. Exports granger cause GDP growth, asserting the unidirectional relationship running from export to GDP growth as postulated by the ELG hypothesis. The study finally winded up by suggesting policy recommendations that will further boast the capacity of the sector vis-à-vis volume , value , composition and destination of exports so to exploit the immense growth potential from the sector and thus achieve the upper hierarchical goals of rapid economic growth and sustainable development