Volume 8, Issue 6, December 2019, Page: 325-338
The Effect of Macroeconomic Variables on Industry Sector Output Growth of Ethiopia
Adisu Abebaw, Department of Economics, College of Business and Economics, Salale University, Fiche, Oromia Region, Ethiopia
Received: Jul. 9, 2019;       Accepted: Jul. 30, 2019;       Published: Sep. 20, 2019
DOI: 10.11648/j.ijber.20190806.11      View  36      Downloads  31
Abstract
Industrialization plays a key role in the process of a nation’s economic development. The experience of the developed world revealed that industrialization significantly increased their productivity and changed the economic structure. Mainly with the context of reoccurring unstable macroeconomic performance in Ethiopia, analyzing the effect of macroeconomic variables on industry sector output growth is a proper way to design suitable industrial policies. Therefore, this study aimed to examine the effect of some macro-economic variables on the industry output growth in Ethiopia. To do so the study used a time series data ranging from 1991 up to 2018 from Ministry of Finance and Economic Cooperation of Ethiopia. The study also used Augmented Dickey-Fuller (ADF) and the Phillip-Perron (PP) unit root tests of stationary, Auto Regressive Distributed Lag (ARDL) bound test to co-integration and error correction model. Accordingly the study confirmed the existence of a long-run relationship between industrial output growth and macroeconomic variables. Macroeconomic variables such as, lending rate, inflation rate and trade balance found to be affecting the industrial sector output growth negatively, positively and negatively, respectively in the long run. Therefore, the government has to keep lending rate to the level that could be amenable for firms and maintaining the trade balance; via manipulating the export and import.
Keywords
Bound Test, Industrial Output, Macroeconomic Variables, Lending Rate
To cite this article
Adisu Abebaw, The Effect of Macroeconomic Variables on Industry Sector Output Growth of Ethiopia, International Journal of Business and Economics Research. Vol. 8, No. 6, 2019, pp. 325-338. doi: 10.11648/j.ijber.20190806.11
Copyright
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Reference
[1]
Adegbemi, B. (2018). Macroeconomic Dynamics and the Manufacturing Output in Nigeria. Department of Economics, Babcock University, Ilishan - Remo, Nigeria. Mediterranean Journal of Social Sciences Vol 9 No 2, Pp 43-54.
[2]
Adisu A. (2018). A causality analysis of intersectoral linkages in Ethiopian economy. Wollega University, Nekemte, Ethiopia.
[3]
Bassey, N., Asinya,. F, Amba, E.(2014). Bank Credit Finance and Macro Economic Determinants of Industrial Output in Nigeria 1980-2010. International Journal of Humanities and Social Science Vol. 4, No. 6; April 2014.
[4]
Beji S., Belhadj A.(2017) The Determinants Of Industrialization: Empirical Evidence For Africa European Scientific Journal. /SPECIAL/ edition ISSN: 1857–7881 (Print) e - ISSN 1857-7431.
[5]
Bolnick, B. (1991). Weak links in the monetary transmission mechanism: The case of Malawi, ODI/HIID Conference on Improving Monetary Policy in Africa and Asia, unpubished manuscript.
[6]
Bruno M., Marco S., Nobuya H. (2017) What factors drive successful industrialization? Evidence and implications for developing countries. DEPARTMENT OF POLICY, RESEARCH AND STATISTICS WORKING PAPER 7/2017. UNIDO.
[7]
Economic Commission for Africa (N. d). A Theoretical perspectives on industrial policy.
[8]
Ernest S. (2013). Macroeconomic Variables and the Productivity of the Manufacturing Sector in Nigeria: A Static Analysis Approach. Department of Economics, Faculty of Social Sciences University of Lagos, Nigeria. Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB) (ISSN: 2306 367X) Volume: 1 No. 5 pp, 362-380.
[9]
Fantu, C. (2016). Structural Transformation in Ethiopia: The Urban Dimension. ECPI Discussion Paper Final Stockholm International Peace Research Institute.
[10]
Granger, C. (1988). Causality, cointegration and control. Journal of Economic Dynamics and Control.
[11]
Harris, R. (Harris, R. and Sollis, R. 2003). “Applied Time Series Modelling and Forecasting”. West Sussex.
[12]
Ibbih JM and Gaiya BA (2013). A cross-sectional analysis of industrialization and growth in Africa. International Research Journal of Arts and Social Sciences (xxx-xxx) Vol. 2 (6) pp. 150-167.
[13]
Ireland, P. (2005). The monetary transmission mechanism. FRB of Boston Working Paper No. 06-1.
[14]
Johansen, S. (1992). Testing Weak Exogeneity and the Order of Cointegration in UK Money Demand. Journal of Policy Modeling, 313-334.
[15]
Kaldor, N. (1975). Economic growth and the Verdoorn Law: A Comment on Mr. Rowthorn’s Article. Economic Journal, Vol. 85, Nr. 340.
[16]
Kassahun, T. (2006). Dynamic Sectoral Linkages in the Ethiopian Economy: A preliminary Assessment. Addis Ababa: Ethiopian Economic Association/Ethiopian Economic Policy Research Institute (EEA/EEPRI).
[17]
Katircioglu, S. (n. d). Co-Integration and Causality between GDP, Agriculture, Industry and Services growth in North Cyprus: Evidence from Time Series Data, 1977-2002. Review of Social, Economic & Business Studies, 7/8, 173-187.
[18]
Kindeye, F. (2014). Industry and Industrialization in Ethiopia: Policy Dynamics and Spatial Distributions. College of Development Studies, Addis Ababa University. European Journal of Business and Management. ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol. 6, No. 34.
[19]
Kumneger, T. (2018). The impact of FDI on the Ethiopian economic growth. Wollega University, Nekemte, Ethiopia. Unpublished thesis.
[20]
Kutu, Adebayo Augustine and Ngalawa, Harold (2016): Monetary policy shocks and industrial output in BRICS countries, SPOUDAI - Journal of Economics and Business, ISSN 2241-424X, University of Piraeus, Piraeus, Vol. 66, Iss. 3, pp. 3-24.
[21]
Landry S., Chelsea J. (2018). The potential of manufacturing and industrialization in Africa Trends, opportunities, and strategies. David M. Rubenstein Fellow, Africa Growth Initiative, Brookings Institution.
[22]
Libiano G (N. D.). “Manufacturing Industry and Economic GrowthIn Latin America: A Kaldorian Approach,” www.policyinnovations.org/ideas/policy_library/data/.
[23]
Mandara, B., Ali, MB. (2018). Appraisal of the Impact of Industrialization on Economic Growth in Nigeria. Department of Business Education, Federal College of Education Yola, Nigeria. Journal of Business and Management (IOSR-JBM), p-ISSN: 2319-7668. Volume 20, Issue 1. Ver. V PP 01-10.
[24]
Mishkin, F. S. (1995). Symposium on the Monetary Transmission Mechanism. Journal of Economic Perspectives, 3-10.
[25]
MoFED. (2010). Growth and Transformation Plan (GTP I) 2010/11-2014/15. Addis Ababa: Ministry of Finance and Economic Development ().
[26]
Mollentze, S. L. (1997). The monetary transmission mechanism: The state of thought. Bureau for Economic Policy and Analysis, Department of Economics, University of Pretoria.
[27]
Montfort M., Larry C., Ahmat J., Monique N., Bozena RB., Misa T., Yanmin Y., Jiayi Z.(2016). Financial Development in Sub-Saharan Africa Promoting Inclusive and Sustainable Growth ISBN: 978-1-47553-240-1.
[28]
Mordi, C. N. O. (2010). The link between the financial (banking) sector and the real economy. Central Bank of Nigeria Economic and Financial Review, 48 (4), pp. 1-12.
[29]
Mulu Gebreeyesus (2013). Industrial Policy and Development in Ethiopia: Evolution and Current Performance. Helsinki, Finland.
[30]
Naval, M. R. (2016). An Empirical study of Inter-Sectoral Linkages and Economic growth in India. American Journal of Rural Development, 4, 78-84.
[31]
NPC. (2016). Growth and Transformation Plan II (2015/16-2019/20). Addis Ababa: National Planning Commission.
[32]
Okoye, L., Clement N (2015) THE INFLUENCE OF FINANCE AND MACROECONOMIC VARIABLES ON MANUFACTURING CAPACITY UTILIZATION IN NIGERIA. The Official Journal of Nigerian Accounting Association Vol. 6, No. 1.
[33]
Oqubay A. (2018). Industrial Policy and Late Industrialization in Ethiopia, Working Paper Series No 303, African Development Bank, Abidjan, Côte d’Ivoire.
[34]
Patrick Enu, Prudence Attah-Obeng (2013) Which Macro Factors Influence Agricultural Production In Ghana? Legon, Ghana.
[35]
Pesaran, M. H., and Pesaran, B. (1997). Working with Microfit 4.0: Interactive Econometric Analysis, Oxford University Press, Oxford.
[36]
Pesaran. M, &. S. (1999). An autoregressive distributed lag modeling approach to cointegration, analysis. Cambridge.: Cambridge University Press.
[37]
Phillips, P. a. (1988). Testing for a Unit root in time series regression. Biometrika, 335-346.
[38]
Rodrik, D. (2008), the Real Exchange Rate and Economic Growth, Brookings Papers on Economic Activity, fall 2008, pp. 365-412.
[39]
Roseline Oluitan Financial Development and Economic Growth in Africa: Lessons and Prospects. Business and Economic Research. ISSN 2162-4860. Vol. 2, No. 2 doi: 10.5296/ber.v2i2.2205 URL: http://dx.doi.org/10.5296/ber.v2i2.2205.
[40]
Samantha N., Liu H.,(2018). The Effect of Foreign Direct Investment on Industrial Sector Growth: Evidence from Sri Lanka. P. R. China. Journal of Asian Development. ISSN 2377-9594 2018, Vo. x, No. x.
[41]
Taddele, F. (2000, April). MEASURING SECTORAL INTERDEPENDENCE IN ETHIOPIA: A SOCIAL ACCOUNTING MATRIX (SAM) APPROACH. Ethiopian Journal of Economics, IX.
[42]
Ubi, P., Lionel E., Eyo, E.(2012). Monetary Policy and Industrialization in an Emerging Open Economy: Lessons from Nigeria. International Journal of Academic Research in Business and Social Sciences. Vol. 2, No. 8 ISSN: 2222-6990.
[43]
Udo, N. (2014). Nigeria Industrial Policies and Industrial Sector Performance: Analytical Exploration. Department of Economics, Akwa Ibom State University, Akwa Ibom State, Nigeria. IOSR Journal of Economics and Finance (IOSR-JEF). p-ISSN: 2321-5925. Volume 3, Issue 4.
[44]
United Nations Trade And Development (2016). The Catch-Up Challenge: Industrialization And Structural Change United Nations Conference On Trade And Development Geneva.
[45]
Worku Gebeyehu, G. A. (2013). Which sector should lead in Ethiopia? Industry or Agriculture? Addis Ababa: Ethiopian Economic Association.
[46]
Wubshet, O. (2008). The determinant of aggregate import demand in Ethiopia: co integration analysis. Addis Ababa, Ethiopia.
Browse journals by subject