African Journal of
Agricultural Research

  • Abbreviation: Afr. J. Agric. Res.
  • Language: English
  • ISSN: 1991-637X
  • DOI: 10.5897/AJAR
  • Start Year: 2006
  • Published Articles: 6848

Article in Press

Effect of inflation on agricultural productivity in Ethiopia

Takele Wogari and Lemi Jeneral

  •  Received: 06 January 2024
  •  Accepted: 15 March 2024
The study examines the impact of inflation Agricultural productivity in Ethiopia; for the period 1990-2022.The study employed the annual time series data from 1990 to 2021 for variables as gross value added, real gross domestic product, Exchange Rate, Inflation and government expenditure. The study adopted an Autoregressive Distributed Lag (ARDL) approach and other econometric tools of analysis to answer the objectives set out in the study. The Augmented Dickey-Fuller, Phillip-Perron Unit Root Test and Bounds Test method of cointegration employed indicates that the series used in the model are all stationary with a unique long run relationship established among the variables. Using econometric procedures, unit root test of augmented dickey fuller test revealed that some of the variables were integrated at First Difference. ARDL test indicated the existence of long-run relationship among the variables. The variables utilized in the investigation include real gross domestic product (RGDP), inflation rate and Agricultural productivity rate. Stationarity test was conducted and the results indicated that all the variables except Inflation rate were stationary at first difference; however, Agricultural productivity, economic growth and external debt became stationary after first differencing. The cointegration test result revealed that long run relationship exists among the variables under study. More so, Error correction term result showed that Exchange rate, government expenditure and inflation have negative and significant impact on Agricultural productivity. Finally, the Granger causality results indicated unidirectional relationship between inflation and Agricultural productivity with causality running from inflation to Agricultural productivity. Using this approach, the researcher finds evidence of a long-run relationship between inflation and Agricultural productivity variables. Based on the findings above, the study therefore, the National Bank of Ethiopia should formulate and implement monetary policies that encourage investments in agriculture, for instance, a special interest rate for the sector as well as providing guarantee for agricultural loans from commercial banks.

Keywords: ARDL , Economic growth, Inflation