The role of agriculture on Brazilian economic growth: Evidence from time series analysis, 1980-2010

ABSTRACT: This thesis empirically investigates the role of agriculture in the Brazilian’s economic growth. Specifically it measures the influence credit in agriculture sector on the Brazilian’s growth of GDP. I conducted Engel-Granger Co-Integration test (EG) and Augmented Dickey-Fuller (ADF) unit root test using a sample of annual data covering the period 1980-2010. The Augmented Dickey-Fuller (ADF) test indicates that the variables in question are all non-stationary in levels, but stationary in first differences; whereas residual-based co integration (Engel-Granger) technique shows that there is a long-run relationship among the variables. Error correction modelling framework also indicates the relationship between the role of agriculture on the Brazilian’s economic growth and its determinants in the short-run. The empirical findings show that ratio of agricultural credit to total export has positive impact on growth of GDP per worker, which stimulates agricultural production as well as economic growth for both long and short-run periods. The exchange rate used in both of the periods has a negative impact on growth of GDP for each single worker. This suggestion shows us an increase in the exchange rate in order to decline in agriculture development as well as economic growth. In addition we understand that negative influence exists between interest rate and agricultural development in short-run for the Brazilian’s economic growth. The ratio of agricultural credit to total credit has no meaningful results on the economic growth. This suggests that a decrease in this variable favourably makes the output growth to decline which is against the notion of empirical model for the Brazilian economy. Keywords: Agricultural Development, Economic Growth, OLS, Unit root test, Co integration, Brazilian economy. …………………………………………………………………………………………………………………………