THE EFFECT AND PERSISTENCE OF MAJOR CHANGES IN ECONOMIC POLICIES ON THE LONG-TERM PERFORMANCE (TREND) OF ETHIOPIAN AGRICULTURE

Agriculture in the Ethiopian economy has survived three major structural breaks, namely the 1974 change of policy in favour of a command-based economic system, the 1984 famine and the 1992 change of policy that introduced a market economy. A regression procedure was applied to analyze the effect of these breaks on the slope and intercept of agricultural GDP. In addition, statistical properties were studied to measure the degree of persistence of shocks in agricultural GDP. In the regression equation, only the 1984 famine was found to be significant. The non-significance of policy parameters in the regression equation could be associated with a lack of infrastructural facilities and the subsistence nature of Ethiopian agriculture. The study of the statistical property of agricultural GDP revealed that agricultural GDP is a trend stationary process, which implies that fluctuations on agricultural GDP series, which mostly occur due to good or bad weather conditions, are temporary and dissipate in a short period of time.