Effect of export diversification on economic growth in Ethiopia

This study investigates the effect of export diversification on economic growth in Ethiopia using time series data ranging from 1994 to 2024. The research applied the ARDL approach to co-integration. The ARDL bound test confirms that there is stable long-run co-integration among the variables included in the model. The long-run model estimation depicts that export diversification has a positive and significant effect on economic growth. This finding supports the export-led growth hypothesis, which is propounded by classical economists such as Adam Smith and David Ricardo, which argues that export growth is the main factor that determines overall economic growth. In the short run, the coefficient of the error correction term, -0.689, shows roughly a 68.9% annual adjustment toward long-run equilibrium. The study suggests that the government has to promote agro-processing, strengthen market access, enhance agricultural financing, and empower cooperatives and farmers to diversify exports.