The relationship between non-traditional agricultural exports and Uganda's Economic Growth

Abstract

The objective of this study was to analyze the relationship between Nontraditional Agricultural Exports (NTAEs) for the period 1994-2019, using the Vector Auto Regression framework (VAR) and the Granger (1969) approach. Levels and first difference plots were used to assess the behavior of the series thus indicating the series followed a similar pattern as they were not mean reverting in levels but mean reverting in first differences. Results of the unit root test using the Augmented Dickey and Fuller (ADF) test revealed that the series were integrated of order zero after taking their first differences. And there existed a long run equilibrium relationship of one (1) rank between the four series based on the computed number of trace statistic. With an optimum lag length of one (1). The findings indicate that GDP had a significant desired negative sign.

The coefficient value (-0.012) of this cointegrating equation implying that in each period, GDP adjusts by about 1.23 percent of the gap between the current level and long run equilibrium level. Thus, the past values levels of GDP are as such important consideration in the current GDP. However, the first Cointegrating equations of GDP, Fish, flowers, TOT and REER were insignificant and lacked the desired negative. We therefore fail to reject null hypothesis of NTAEs and conclude that NTAEs is not granger causing GDP at 5% level of significance. However, we accepted alternative hypothesis at 5 percent level of significance, “GDP granger causes NTAEs. Consequently, the first difference coefficient (1.580) for the first lag for fish indicates a positive relationship between fish exports and GDP, similarly for flowers (2.088). Thus, there is need to improve fish and flower exports to improve Uganda’s GDP performance. In terms of policy, the study called for more investment in fishing activities and flower farming through attracting more FDIs, and diversify exports, ensure stable supply to meet market targets; identify new export destinations in regional and emerging markets; ensure that the exports are competitive and meet international standards through investment in research and development.