The Contributions of Exports of Some Minerals to the Ethiopian Economy

Abstract

An assessment on the contribution of exports of some mineral resources to Ethiopia’s economy was carried out for the period 1994/95 – 2013/14. The study employed the testing of the long run and short run relationship and causality between exporting mineral resources and economic growth by including another macroeconomic variable, i.e., popular time series econometric techniques of co-integration, Vector error correction estimation and Granger causality test. The results from unit root test and co-integration have shown the existence of long-run relations and volatility among the variables, indicating that the export of minerals has not been constant as it fluctuates from year to year.The Granger causality test had indicated that in the short-run there was no causality among variables, but in the long-run, there was bi-directional causality among the five variables, namely, GDP, Export of Opal, Export of Tantalum, Export of Gold and Exchange Rate. The key finding in this study is that export of major minerals had positively and significantly affected economic growth in Ethiopia, and this growth had stimulated the export of minerals in the long-run.