Agricultural Sector and Economic Growth in Tunisia: Evidence from Co-integration and Error Correction Mechanism

Abstract

For the past two decades, Tunisia has been undertaken important structural reforms, which call in most cases for market and trade liberalization (agricultural structural adjustment program, GATT reforms, free trade area with the European Union). The private-led type of growth strategy with less government intervention has culminated these last years into a more rapid economic growth and openness. Within this context, this paper examines the agricultural sector role into the economic growth and its interactions with the other sectors using time-series co-integration techniques. We use annual data from 1961 to 2005 to estimate a VAR model that includes GDP indices of five sectors in Tunisian economy. Empirical results from this study indicate that in the long-run all economic sectors tend to move together (co-integrate). But, in the short-run, the agricultural sector seems to have a limited role as a driving force for the growth of the other sectors of the economy. In addition, growth of the agricultural output may not be conducive directly to non-agricultural economic sector in the short-run.

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