IMPACT OF GOLD EXPORT ON ECONOMIC GROWTHIN ETHIOPIA USING ARDL APPROACH

Abstract

Many scholars have tried to point out how to better country to the development road. In our country also scholar policy makers and many stake holders suggest a way to economic development. One of the many approaches is through export oriented approach. Gold become one of emerging export item in Ethiopia and become of a focus for government since Great transformation plan one. It can be seen that the attention there is no enough study about the nexus between economic growth and Gold export in the country, even in Africa.The economic development the major objective of this study was to examine the impact of gold exports on economic growth in Ethiopia. The study employed an extended generalized Cobb–Douglas production function model using data from the National Bank of Ethiopia and World Bank data, a base from 1992 to 2021. All the variables were non stationary at level and integrated of order I (2), and then co-integration test was conducted to ensure the existence of long-run relationship using Johansen’s approach. Consequently, all the variables confirmed co-integration, and the conventional VECM was estimated to extract both short-run and long-run relationships, Granger causality test was conducted to diagnose the direction of causation thefinding of the study revealed that gold exports have insignificant short-run impact on economic growth, but significant positive impact in long run. The result from causality exerted bidirectional relationship holds in Ethiopia’s gold exports, likewise the result from IRF revealed gold exports has a positive impact on long-run, economic growth. Besides, labor force, capital formation, and real effective exchange rates included in the model were found positive and significant impact in long run. Based on the findings, it is recommended that a long-run policy towards exports in general and gold export is believed to provide significant impact on economic growth thus, increasing efficiency of the sector and exporting gold would enable Ethiopia to sustain domestic economic growth. Besides, values had better be added to gold before exporting and when this is done, it will lead higher economic growth in long run.