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Causal Relationship between Economic Growth and Agricultural productivity in Sub Saharan Africa: A Panel Cointegration Approach

Ogundari, Kolawole (2021): Causal Relationship between Economic Growth and Agricultural productivity in Sub Saharan Africa: A Panel Cointegration Approach.

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Abstract

The study revisits the causal relationship between agricultural productivity and economic growth in sub-Saharan Africa. The analysis is based on the panel cointegration approach, estimated using the Pooled Mean Group (PMG) estimators. The study employs a cross-country balanced panel data covering 35 countries from 1981 to 2010. Per capita, gross domestic product is an indicator of economic growth, and the total factor productivity (TFP) index is an agricultural productivity indicator used in the study. The empirical results show the variables have a different integration order based on the unit root test, while evidence of a cointegration relationship among the variables exists. The estimated PMG shows that in the long and short-run, agricultural TFP has significant positive and negative effects on economic growth, respectively, in the study. There is no effect of economic growth on agricultural TFP either in the long and short run. While the causality test shows that agricultural TFP Granger causes economic growth in the long and short run, we found no evidence that economic growth Granger causes agricultural TFP in the short run except in the long run. These findings show that greater attention to improving agricultural TFP would increase economic growth in the region.

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