Empirical investigation on the dynamics effects of population and economic growth in Ethiopia: an application of the VEC model

Figures & data

Figure 1. Summary of the relationship between population and economic growth.

Table 1. Variable description.

Variables^1	Description	Source	Expected sign
RGDP	The monetary value of Real Gross Domestic Product at basic year price which measures economic growth	National Bank of Ethiopia (NBE), EEA	Economic growth is best measured by real GDP than nominal GDP (eg. Mankiw, 1998; Barro, 1995). As a result, this study uses RGDP measured in Ethiopian currency.
PG	It is the total number of people increases in a country and a given period.	World Bank	PG has a positive, negative, and neutral effect on Economic growth (Malthus, 1798; Boserup, 1965; and neutralist argument). Therefore, this study also expects negative signs.
MS/P	Real money supply at a period in Ethiopia	National Bank of Ethiopia (NBE), EEA	Money supply has an importance on economic growth. This is supported by many monetarist views (Chaitip et al., 2015). Hence, this study also expects positive signs.
ED/GDP	External debt to gross domestic product ratio at a period	National Bank of Ethiopia (NBE), MOFED report	ED/GDP harms economic growth (Teklu et al., 2014). Thus, this study expects a negative sign.
INF	The average increase in price in a year	National Bank of Ethiopia (NBE), MOFED	Inflation is one macroeconomic variable that determines growth and can be considered a curse for economic growth. (Khan & Naushad, 2020 in World Economy). As a result, this study also expects negative signs.

Table 2. Unit root test using ADF.

	Augmented Dickey-Fuller test (ADF)					Order of integration
	At level		At first difference
Variable	t-statistics	Critical value	t- statistics	Critical value	Prob*
LNRGDP	−1.555410	−4.296729	−4.622814	−3.679322***	0.0009	I(1)
LNPG	−0.532359	−4.416345	−3.957230	−3.632896**	0.0266	I(1)
LN(MS/P)	−3.060965	−4.374307	−5.368701	−4.323979***	0.0009	I(1)
LN(ED/GDP)	−1.838280	−4.296729	−4.607807	−4.309824***	0.0050	I(1)
Inf	−3.028270	−4.394309	−7.360012	−4.323979***	0.0000	I(1)

Source: own-computation from Eviews output.

Note that ***, and ** refer to significance at the 1%, and 5% levels, respectively.

Table 3. Lag selection result.

Lag Order Selection Criteria Endogenous variables: LNRGDP LNPG LN_MS_P_ LN_ED_GDP_ INF
Lag	LogL	LR	FPE	AIC	SC	HQ
0	−73.49385	NA	0.000154	5.413369	5.649109	5.487200
1	109.0231	289.5096*	3.05e-09*	−5.449869*	−4.035425*	−5.006883*
2	133.8176	30.77933	3.66e-09	−5.435694	−2.842546	−4.623552

* indicates the lag order selected by criterion.

Figure 2. Trend between population and Economic growth rate in Ethiopia from the period 1991–2022.

Source: Computation from Eviews 10 output based on UN projection and WB, 2023, and NBE report, 2021/2022.

Table 4. Causality test.

Granger Causality/Block Erogeneity Wald Tests Dependent variable: LNRGDP
Excluded	Chi-sq	Prob
LNPG	1.429546	0.2318
LN_MS_P_	0.396729	0.5288
LN_ED_GDP_	0.050897	0.8215
INF	0.084409	0.7714
Granger Causality/Block Erogeneity Wald Tests Dependent variable: LNPG
Excluded	Chi-sq	Prob.
LNRGDP	0.387998	0.5334
LN_MS_P_	4.149010	0.0417
LN_ED_GDP_	0.292413	0.5887
INF	0.316610	0.5737

Table 5. Long-run relationship of cointegrated vectors.

Cointegrating Eq:	CointEq1
LNRGDP(-1)	1.000000
LNPG(-1)	13.89011
	(3.28872)
	[ 4.22357]
LN_MS_P_(-1)	−3.222915
	(0.44704)
	[-7.20944]
LN_ED_GDP_(-1)	0.862275
	(0.14076)
	[ 6.12577]
INF(-1)	0.036057
	(0.01099)
	[ 3.28104]
C	−102.4658

Table 6. Short run dynamics of VECM.

Error Correction:	D(LNRGDP)	D(LNPG)	D(LN_MS_P_)	D(LN_ED_GDP_)	D(INF)
CointEq1	−0.089021	−0.002761	0.117133	−0.256570	−18.06627
	(0.10985)	(0.00167)	(0.07406)	(0.24725)	(4.17256)
	[−2.08104]	[−1.65174]	[ 1.58150]	[−1.03771]	[−4.32978]
D(LNRGDP(−1))	0.103326	0.003829	0.063048	0.041039	11.98216
	(0.23535)	(0.00358)	(0.15868)	(0.52973)	(8.93975)
	[ 0.43903]	[ 1.06930]	[ 0.39732]	[ 0.07747]	[ 1.34032]
D(LNPG(−1))	−3.361901	1.712302	−36.51908	5.175233	2839.242
	(36.0109)	(0.54792)	(24.2802)	(81.0538)	(1367.87)
	[−0.09336]	[ 3.12511]	[−1.50407]	[ 0.06385]	[ 2.07567]
D(LN_MS_P_(−1))	−0.212125	−0.009688	−0.069729	−1.012102	36.14779
	(0.35858)	(0.00546)	(0.24177)	(0.80709)	(13.6205)
	[−0.59157]	[−1.77577]	[−0.28841]	[−1.25401]	[ 2.65392]
D(LN_ED_GDP_(−1))	0.065167	0.002381	−0.018263	0.399477	7.333830
	(0.10975)	(0.00167)	(0.07400)	(0.24702)	(4.16870)
	[ 0.59380]	[ 1.42572]	[−0.24681]	[ 1.61720]	[ 1.75926]
D(INF(−1))	0.000844	1.75E−05	−0.006899	−0.004487	−0.078999
	(0.00277)	(4.2E−05)	(0.00187)	(0.00624)	(0.10531)
	[ 0.30430]	[ 0.41439]	[−3.69055]	[−0.71905]	[−0.75017]
C	0.142857	−0.008922	0.537316	−0.007428	−39.62761
	(0.44927)	(0.00684)	(0.30292)	(1.01123)	(17.0656)
	[ 0.31797]	[−1.30512]	[ 1.77378]	[−0.00735]	[−2.32207]

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Data availability statement

Data will be made available on request.