Macroeconomic Determinants of Agricultural Output in Somalia: Short- and Long-Run Evidence from an ARDL Approach
Description
Macroeconomic Determinants of Agricultural Output in Somalia: Short- and Long-Run Evidence from an ARDL Approach Mahad Abdiwali Mohamed1*, Abdiaziz Bashir Mohamud2, Ahmed Nur Dirie3, Hussein Mohamud Ahmed4, Abdifatah Mohamed Abdulle5 & Abdihamid Mahdi Mohamed6 1, 2, 3, 4, 5 & 6 Faculty of Economics and Management, Salaam University, Mogadishu, Somalia. *Corresponding author: keynaan4441@gmail.com, ORCID: https://orcid.org/0009-0004-7618-7462 Abstract This study examines the relationships of external debt, official development assistance (ODA), foreign direct investment (FDI), domestic investment, and government expenditure with agricultural output in Somalia from 1990 to 2023. Annual time-series data were obtained from SESRIC, and agricultural output was measured as agricultural value added in millions of US dollars. The autoregressive distributed lag (ARDL) bounds-testing approach was applied because the variables were integrated of order zero, I(0), or order one, I(1), and the sample was relatively small. The bounds-test statistic (F = 6.270) exceeded the 1% upper critical bound (4.21), supporting a long-run cointegrating relationship. In the short run, FDI (coefficient = -0.014, p = 0.0069) and external debt (coefficient = -0.267, p < 0.001) were negatively associated with agricultural output, whereas domestic investment was positively associated with it (coefficient = 0.437, p < 0.001). ODA and government expenditure were not statistically significant in the short run. The error-correction term was negative and significant (ECT(t−1) = -0.508, p < 0.001), indicating that approximately 50.8% of a short-run disequilibrium was corrected within one year. In the long run, FDI (coefficient = 0.061, p < 0.001) and domestic investment (coefficient = 2.152, p < 0.001) were positively associated with agricultural output, whereas ODA (coefficient = -0.117, p = 0.0125) and government expenditure (coefficient = -0.896, p < 0.001) were negatively associated with it. External debt was negative but statistically non-significant (coefficient = -0.273, p = 0.1111). Diagnostic and stability tests supported the model's adequacy. The findings emphasize productive domestic capital formation, agriculture-oriented FDI, better aid coordination, prudent borrowing, and the reallocation of public expenditure toward productivity-enhancing agricultural investment. Keywords: agricultural output; autoregressive distributed lag; domestic investment; external debt; foreign direct investment; government expenditure; official development assistance; Somalia. JEL Classification: O13, Q18, F35, F21, F34, O55, C22
Files
Steps to reproduce
No funding was received for this study.
Institutions
- Salaam UniversityBanaadir, Mogadishu