Keywords:-

Keywords: Agriculture, GDP, Engle-Granger causality, Impulse-Response, Sri Lanka.

Article Content:-

Abstract

The major perception for every emerging state such as Sri Lanka, is to touch excessive economic growth. This study inspects the causal association among Gross Domestic Product (GDP) which is the monetary measure of a country’s economy and its three components, agricultural (primary component), industrial (secondary component) and services sectors (tertiary component) in Sri Lanka, established on the annual time series data for the period of 1960 – 2017 obtained from the Annual Report of World Bank Economic Indicators and Annual Report of Central Bank of Sri Lanka. For this motive, Augmented Dickey Fuller unit root test was involved to test the stationarity of the four variables and they have been found stationary at first differences. The least information criterions were used to estimate the optimum lag length. The presence of the long run association between the GDP and the three components were examined using the Vector Autoregressive (VAR) Cointegration test. Then the Engle-Granger causality/block exogeneity Wald test, Impulse Response and Variance Decomposition analysis were supported out and the significances displayed two-way Granger causality from agricultural sector to economy and service sector, two-way Granger causality from agricultural sector to industrial sector and from industrial sector to both GDP and service sector. This is an predictable concern for every emerging country wherever the agriculture is answerable for a countless proportion of nationwide economic growth. Therefore the suitable commendations were proposed. The major perception for every emerging state such as Sri Lanka, is to touch excessive economic growth. This study inspects the causal association among Gross Domestic Product (GDP) which is the monetary measure of a country’s economy and its three components, agricultural (primary component), industrial (secondary component) and services sectors (tertiary component) in Sri Lanka, established on the annual time series data for the period of 1960 – 2017 obtained from the Annual Report of World Bank Economic Indicators and Annual Report of Central Bank of Sri Lanka. For this motive, Augmented Dickey Fuller unit root test was involved to test the stationarity of the four variables and they have been found stationary at first differences. The least information criterions were used to estimate the optimum lag length. The presence of the long run association between the GDP and the three components were examined using the Vector Autoregressive (VAR) Cointegration test. Then the Engle-Granger causality/block exogeneity Wald test, Impulse Response and Variance Decomposition analysis were supported out and the significances displayed two-way Granger causality from agricultural sector to economy and service sector, two-way Granger causality from agricultural sector to industrial sector and from industrial sector to both GDP and service sector. This is an predictable concern for every emerging country wherever the agriculture is answerable for a countless proportion of nationwide economic growth. Therefore the suitable commendations were proposed. 

References:-

References

Ferreira, C. (2009). Public Debt and Economic Growth: A Granger Causality Panel Data Approach. Lisbon: Technical University of Lisbon.

Kasa, K. (1992). Common stochastic trends in international stock markets. Journal of Monetary Economics, 29, 95-124.

Konya, L. (2004). Unit-root, Cointegration and Granger Causality Test Results for Export and Growth in OECD Countries. International Journal of Applied Econometrics and Quantitative Studies, 1(2), 73-94.

Phillips, P. C. B., and Perron, P. (n.d.). Testing for a unit root in time series regression. In Biometrica (Vol. 75, pp. 335-346).

Rahman M, Rahman S, Hai-Bing W. (2011). Time Series Analysis of Causal Relationship among GDP, Agricultural Industrial and Service Sector Growth in Bangladesh. China-USA Business Review.

Engle, R. F., and Granger, C. W. J. (n.d.). Cointegration and error correction representation, estimation and testing. In Econometrica (Vol. 55, pp. 251-76).

Boghean C, State M. (2015). The relation between foreign direct investments and labour productivity in the European Union countries. In Procedia Economics and Finance (Vol. 32, pp. 278-285).

Temiz, D., Gokmen, A. (2010). An Analysis of the Export and Economic Growth in Turkey over the period of 1950-2009. International Journal of Economic and Administrative Studies, 5(5).

Wang SL, McPhail L. (2012). Impact of energy shocks on US agricultural productivity growth and commodity prices-A structural VAR analysis. In Energy Economics (Vol. 46, pp. 435-444).

Downloads

Citation Tools

How to Cite
Haalisha, A. (2018). A VAR Model Approach for Analysing Causative Association between Sri Lankan Economy and the Components of Economy. International Journal Of Management And Economics Invention, 4(12), 1989-1993. https://doi.org/10.31142/ijmei/v4i12.01