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Research Article

Academia Journal of Scientific Research 8(11): 362-370, November 2020
DOI: 10.15413/ajsr.2020.0135
ISSN 2315-7712
2020 Academia Publishing

Abstract


Analysis of economic growth indicators in ethiopia using vector autoregressive models
 

 

Accepted 7th September, 2020

Abdi Tesfaye1 and Gemechu Bekana2

1Department of Statistics, College of Natural and Computational Science, Bule Hora University, Bule Hora, Ethiopia.
2Assistant Professor of Statistics, Department of Statistics, College of Natural and Computational Science, Wollega University, Nekemte, Ethiopia.

The objective of this study was to carry out an Analysis of Economic Growth indicators in Ethiopia using Vector Autoregressive models. Yearly data set on the variables for the period of 1988 to 2018 was obtained from the National Bank of Ethiopia (NBE) and CSA. Vector Autoregressive (VAR) Models, Testing Stationary: Unit root test, Estimating the Order of the VAR, Cointegration Analysis (testing of cointegration), and Vector Error Correction (VEC) Models were used in this study for data analysis. Unit root test reveals that all the series are nonstationary at level and stationary at first difference. The result of Johansen test indicates the existence of one cointegration relation between the variables: LRGDP, Lexport, Limport, inflation and Exchange rate are co-integrated, which implies that the variables have long run equilibrium relationship. The Result of Vector Error Correction Model (VECM) from term in LRGDP equation is weakly significant at 5% level and has a negative value, implying that there exists a long run relationship running from inflation, Lexport, Limport and Exchange rate to Real GDP. The final result shows that a Vector Error Correction (VEC) model of lag two with one cointegration equation best fits the data.

Key words: Vector autoregressive, Ethiopia, vector error correction and economic growth.
 

This is an open access article published under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Cite this article as:

Tesfaye A, Bekana G (2020). Analysis of economic growth indicators in ethiopia using vector autoregressive models. Acad. J. Sci. Res. 8(11): 362-371.

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