The Causality Between Agriculture and Economic Growth in the Arab World

This paper contributes to the controversy that exists among scholars on the link between agriculture and economic growth. Although there is much literature on the importance of the agricultural sector for economic growth, there is a lack of empirical evidence regarding the Arab World. This paper is one of the very few studies which examine the causality between agriculture and economic growth in a selection of eight Arab countries using time series econometric methods. Time series data from 1980-2018 are employed in this study which is obtained from the official website of the World Bank. However, agriculture is a variable of interest, exports and terms of trade are also included in the estimated models as additional determinants of economic growth. Both the Johansen test and the autoregressive distributed lag bound test are used to study the cointegration between agriculture and economic growth. The results suggest that agriculture could be used as an engine to promote economic growth for some Arab countries since a long-run relationship exists between the variables. Therefore, these countries would be able to enhance the value-added of agriculture through further investment in this sector. However, the direction of the causal relationship between agriculture and economic growth varies across countries. In most Arab countries, the economic growth could be used as a catalyst for growth in the agricultural sector since the direction of causality is from economic growth towards agriculture.