Agricultural Capital Formation And Its Impact On Economic Growth In Yemen Using ECM ) 2016-1990( د. عدنان الصنوي(1) د. طارق الأغبري(2) الباحثة / ابتسام عزان(3)

Abstract

Abstract

The study aimed to highlight the role of Yemeni agricultural economy in economic development. In addition to test the long-run co-integration relationship between the study variables with Gross Domestic Product (GDP) and Gross Agricultural Capital Formation (GACF) by using secondary data for a time series from 1990 to 2018. Therefore, to achieve the objectives of this study the descriptive analytical approach was adapted to investigate the relationship between agricultural production and economic growth. Beside that, some statistical methods were used too, which were represented by economic measurement tools as well as a set of automated data processing programs like EVIEWS 9 and Excel Programs.

The study has reached the following results:

Through testing the dormancy of time series by using Augmented Dickey-Fuller (ADF) test, the hypothesis of time series stability was rejected. It concluded that the two series (GACF & GDP) are not in stable level. Moreover, and through Engel-Granger test for co-integration, it was noted that there is co-integration between the study variables.

Furthermore, when the error correction model (ECM) was applied, it confirmed that there is a long-run co-integration relationship between the study variables (GDP & GACF).

It was noted that the estimated error is negative for the algebraic sign and insubstantial statistically; accordingly, this means that there is indeed a long-run equilibrium relationship in the model. The value of the error correction factor (-0.09) indicates that (GDP) can adjust towards its equilibrium value in each period by a percentage of the remaining imbalance from the previous period which is equal to 9%.

According to the previous results, the study recommends that all efforts should be shifted to the agricultural sector by investing more in this sector and allocating greater support for agricultural research in order to stimulate innovation and introduce modern means into production processes.

Key Words: Gross Domestic Product (GDP), Economic Growth, Agricultural Capital Formation (ACF), Error Correction Model (ECD), long-run